Question

Goodson Healthcare purchased a new sonogram imaging unit for $300,000 and a truck body and chassis for an additional $100,000 to make the unit mobile. The unit-truck system will be depreciated as one asset. The functional life is 8 years, and the salvage is estimated to be 9% of the purchase price of the imaging unit regardless of the number of years of service. Use classical Straight Line depreciation to determine the salvage value, annual depreciation, and book value after 4 years of service. The salvage value is determined to be _______________$ . The annual depreciation is determined to be ______$ . The book value after 4 years of service is determined to be________ $ .

Answer 1

Answer:-

The initial cost of the imaging unit is $300,000 and the cost of truck body and chassis is $100,000. It is given that they both will be considered as one asset. Thus, the initial cost of the unit truck is $400,000 ($300,000+$100,000). The functional life of the truck is 8 years and salvage value is 9% of the purchase price of the imaging unit.

1.) The salvage value is determined to be:-

Salvage value = 9% of initial cost of the Imaging unit.

Thus , the salvage value of the unit is $27,000.

------------------------------------------------------- 2.) The annual depreciation is determined to be:-

Thus, the annual amount of depreciation is $46,625.

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3.) The book value after 4years of service is determined to be :-

Following is the way to calculate the book value of the unit after 4 years :

BOOK VALUE = INITIAL COST - ACCUMULATED DEPRECIATION

= $400,000 - ( 4 * 46,625)

= $400,000 - $186,500

= $213,500

Thus, the book value of the unit after 4 years of service is $213,500.

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