Exercise 21-13 (Part Level Submission) On January 2, 2016, Twilight Hospital pur

Question

Exercise 21-13 (Part Level Submission) On January 2, 2016, Twilight Hospital purchased a $103,200 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 $105,000 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 $24,000 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 $57,000 (a) Your answer is correct. If Twilight Hospital sells its old scanner on January 2, 2017, compute the gain or loss on the sale. Loss on sale 20,400 SHOW SOLUTION SHOW ANSWER LINK TO TEXT By accessing this Question Assistance, you will learn while you earn points based on the Point Potential Policy set by your instructor. Attempts: 1 of 3 used (b) 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 amounts. In the third column, enter net income increases as positive amounts and decreases as negative amounts. Enter negative amounts using either a negative sign preceding the number e.g. 45 or parentheses e.g. (45).) Retain Scanner Replace Scanner Net Income Increase (Decrease) Annual operating costs New scanner cost Old scanner salvage

Explanation / Answer

Current Proposed Jan 2 2016 Purchase Cost 103200 110000 Useful Life 4 3 Depreciation PA 25800 36666.66667 Annual Operating Cost 105000 81000 (105000-24000) Old Scanner Scrap 57000 1 Book Value: Purchase Cost 103200 Depreciation PA 25800 Net Book Value 77400 Sales Value 57000 Loss on Sales 20400 2 Incremental Report: Retain Scanner Replace Scanner Net Income Annual Operating Cost -105000 -81000 -24000 New Scanner Cost 0 110000 -110000 Old Scanner Salvage 0 -57000 57000 Total -105000 -28000 -77000 Since Net Income is Negative; it should not purchase new Scanner No

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