Goodson Healthcare purchased a new sonogram imaging unit for $300,000 and a truc
ID: 1103762 • Letter: G
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 11% 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 3 years of service.
The salvage value is determined to be $ .
The annual depreciation is determined to be $ .
The book value is determined to be $ .
Explanation / Answer
Initial cost ($) = Purchase price + Chassis cost = 300,000 + 100,000 = 400,000
(a) Salvage value ($) = Purchase price x 11% = 300,000 x 11% = 33,000
(b) Annual depreciation ($) = (Initial cost - Salvage value) / Useful life = (400,000 - 33,000) / 8 = 367,000 / 8
= 45,875
(c) Accumulated depreciation in 3 years ($) = 33,000 x 3 = 99,000
Book value after 3 years ($) = Initial cost - Accumulated depreciation in 3 years = 400,000 - 99,000 = 301,000
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