On January 2, 2016, Twilight Hospital purchased a $104,400 special radiology sca
ID: 2468155 • Letter: O
Question
On January 2, 2016, Twilight Hospital purchased a $104,400 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 $110,000 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 $55,500. If Twilight Hospital sells its old scanner on January 2, 2017, compute the gain or loss on the sale. Prepare an incremental analysis of Twilight Hospital. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)Explanation / Answer
Janualry 2, 2016 , Radiology Scanner Purchase value 104400 Less: Depreciation for one year 26100 (104400/4 years * 1 year) Value as on January 2 , 2017 78300 Less: Sale value 55500 Profit / (Loss) value of sale of Scanner (22,800) Incremental analysis of Twilight Hospital Retain Scanner Replace Scanner Net Income Increase / (Decrease) Annual Operating Cost 106000 81000 25000 New Scanner Cost 110,000 (110,000) Old Scanner Salvage 55000 55000 Loss of Sale of Old Scanner 22800 22800 Total 183800 191000 -7200
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