Goodson Healthcare purchased a new sonogram imaging unit for $300,000 and a truc
ID: 2620662 • 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 13% 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 6 years of service.
The salvage value is determined to be $ .
The annual depreciation is determined to be $ .
The book value after 6 years of service is determined to be $ .
Explanation / Answer
Salvage value:
Purchase price of asset = $4,00,000 ($3,00,000 + $1,00,000)
Salvage value = 13% of purchase price
= $4,00,000 * 13%
= $52,000
Salvage value = $52,000
Annual Depreciation:
Purchase price of asset = $4,00,000
Salvage value = $52,000
Life = 8 years
Annual Depreciation under SLM = (Purchase price of asset - Salvage value) / lIfe of asset
= ($4,00,000 - $52,000) / 8
=$43,500
Annual Depreciation = $43,500
Book value after 6 years:
Book value after 6 years = Purchase price - Depreciation for 6 years
= $4,00,000 - $43,500 * 6
= $1,39,000
Book value after 6 years = $1,39,000
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