Exercise 1-13 (Part Level Submission) On January 2, 2016, Twilight Hospital purc

Question

Exercise 1-13 (Part Level Submission) On January 2, 2016, Twilight Hospital purchased a $104,000 special radiology scanner from Bella Inc. The scanner had a useful life of 4 years and was estimated to have no disposal value at the end of its useful life. The straight-line method of depreciation is used on this scanner. Annual operating costs with this scanner are $106,000. Approximately one year later, the hospital is approached by Dyno Technology salesperson, Jacob Cullen, who indicated that purchasing the scanner in 2016 from Bella Inc. was a mistake. He points out that Dyno has a scanner that will save Twilight Hospital $25,000 a year in operating expenses over its 3-year useful life. Jacob notes that the new scanner will cost $111,000 and has the same capabilities as the scanner purchased last year. The hospital agrees that both scanners are of equal quality. The new scanner will have no disposal value. Jacob agrees to buy the old scanner from Twilight Hospital for $55,000. (a) If Twilight Hospital sells its old scanner on January 2, 2017, compute the gain or loss on the sale.

Explanation / Answer

Calculation of depreciation Cost of scanner 104000 Life of Scanner 4 Depreciation 26000 Calculation of gain/loss on sale Cost of special radiology scanner 104000 (-) Depreciation 26000 Book value special radiology scanner 78000                     as on Jan 2nd 2017 (-) Sale value 55000 Loss on sale 23000

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