Plant Assets, Natural Resources, and Intangible Assets Ex. 246 The Hartiey Clinic purchased a new surgical laser for $90,000. The estimated salvage value is $5,000. The laser has a useful life of five years and the clinic expects to use it 10,000 hours. It was used 1,600 hours in year 1; 2,200 hours in year 2; 2,400 hours in year 3; 1,800 hours in year 4; 2,000 hours in year 5. Instructions (a) Compute the annual depreciation for each of the five years under each of the following methods: (1) straight-line. (2) units-of-activity. (b) If you were the administrator of the clinic, which method would you deem as most appropriate? Justify your answer. (c) Which method would result in the lowest reported income in the first year? Which method would result in the lowest total reported income over the five-year period?
Plant Assets, Natural Resources, and Intangible Assets Ex. 246 The Hartiey Clinic purchased a new surgical laser for $90,000. The estimated salvage value is $5,000. The laser has a useful life of five years and the clinic expects to use it 10,000 hours. It was used 1,600 hours in year 1; 2,200 hours in year 2; 2,400 hours in year 3; 1,800 hours in year 4; 2,000 hours in year 5. Instructions (a) Compute the annual depreciation for each of the five years under each of the following methods: (1) straight-line. (2) units-of-activity. (b) If you were the administrator of the clinic, which method would you deem as most appropriate? Justify your answer. (c) Which method would result in the lowest reported income in the first year? Which method would result in the lowest total reported income over the five-year period?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:Plant Assets, Natural Resources, and Intangible Assets
Ex. 246
The Hartley Clinic purchased a new surgical laser for $90,000. The estimated salvage value is
$5,000. The laser has a useful life of five years and the clinic expects to use it 10,000 hours. It was
used 1,600 hours in year 1; 2,200 hours in year 2; 2,400 hours in year 3; 1,800 hours in year 4;
2,000 hours in year 5.
Instructions
(a) Compute the annual depreciation for each of the five years under each of the following
methods:
(1) straight-line.
(2) units-of-activity.
(b) if you were the administrator of the clinic, which method would you deem as most appropriate?
(a)
Justify your answer.
(c) Which method would result in the lowest reported income in the first year? Which method
would result in the lowest total reported income over the five-year period?
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