Home Health Care, Inc. purchased a new sonargram imaging unit for $300,000 and h
ID: 2438985 • Letter: H
Question
Home Health Care, Inc. purchased a new sonargram imaging unit for $300,000 and had it mounted on a truck body for an additional $100,000, including the truck chassis. The unit- truck system will be depreciated as one asset. The functional life is 8 years, and salvage is estimated at 10% of the purchase price of the imaging unit. Use classical straight-line depreciation to determine the salvage value, annual depreciation, and book value after 4 years. S $30,000 D(t)- $46,250 per year t (t 1.,., 8) BV in year 4 $215,000 S $33,000 D(t) $56,250 per year t (t 1.,.,8) BV in year 4 $225,000 S $35,000 Dit)- $45,350 per year t (t -1.,. 10) BV in year 4-$235,000 s $25,000 D(t) $47,150 per year t (t - 1...6) BV in year 4- $220,000Explanation / Answer
Purchase price = $300,000
Installation = $100,000
Cost = Purchase price + Installation = 300,000 + 100,000 = $400,000
Life years = 8
Solution:
Salvage value (S) = Purchase price × 10% rate
= 300,000 × 10%
= $30,000
Depreciation = (Cost – Salvage value) / Life years
= (400,000 – 30,000) / 8
= 370,000 / 8
= $46,250
Book value (end of 4th year) = Cost – (Depreciation × Year 4)
= 400,000 – (46,250 × 4)
= 400,000 – 185,000
= $215,000
Answer: 1st option
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