The Hartley Clinic purchased a new surgical laser for $90000. The estimated salvage value is $5000. The laser has a useful life of five years and the clinic expects to use it 10000 hours. It was used 1600 hours in year 1; 2200 hours in year 2; 2400 hours in year 3; 1800 hours in year 4; 2000 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?

Question

Quizplus · Accepted Answer

The Answer of The Hartley Clinic purchased a new surgical laser for $90000. The estimated salvage value is $5000. The laser has a useful life of five years and the clinic expects to use it 10000 hours. It was used 1600 hours in year 1; 2200 hours in year 2; 2400 hours in year 3; 1800 hours in year 4; 2000 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?

The Hartley Clinic Purchased a New Surgical Laser for $90000