On Jenuary 2, 2016, Twilght Hospital purchased a s96,400 special radiology scann

Question

On Jenuary 2, 2016, Twilght Hospital purchased a s96,400 special radiology scanner from Bella Inc. The scanner had a of its useful life. The straight-line method of depreciation is used on this scanner LSCREEN PRENTER VERSION BACK Annual operating costs with this scanner are $1 06,000. Approximately one year lster, the hospital out that Dyno has a scanner that w capabilities as the scanner purchased last Twillight Hospital for $45,500. is approached by Dyno Technology salesperson, Jacob Cullen, who indicated that Dyno Technology 2016 from Bella Inc. was a mistake. He points 000 a year in operating expenses over iRs 3-year useful life. Jacob notes that the new scanner will cost $110,000 and has the same save Twillight Hospital $25,0 year. The hospital agrees that both scanners are of equal quality. The new scanner will have no disposal value. Jacob agrees to buy the oid scanner from 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. (In the first two columns, enter costs and expenses as positive amounts, and any amounts received as negative amou third column, enter net income increases as positive amounts and decreases as negative amounts. Enter negative amounts using either a negative -45 or parentheses e.g. (45) Net Income Retain Scanner Scanner (Decrease) Operating costs New scanner cost oid scanner salvage Total

Explanation / Answer

Solution 1:

Cost of old scanner = $96,400

Salvage value = $0

Life = 4 years

Annual depreciation using SLM = $96,400 /4 = $24,100

Book value of scanner on 02.01.2017 = $96,400 - $24,100 = $72,300

Sale value of old scanner = $45,500

Gain (Loss) on sale = $45,500 - $72,300 = ($26,800)

Solution 2:

Incremental Analysis - Twilight Hospital Particulars Retain Scanner Replace Scanner Net Income Increase (Decrease) Operating costs $318,000.00 $243,000.00 $75,000.00 New Scanner cost $0.00 $110,000.00 -$110,000.00 Old Scanner Salvage $0.00 -$45,500.00 $45,500.00 Total $318,000.00 $307,500.00 $10,500.00

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