Assignment
The Donovan Medical Centre purchased a new surgical laser for $64,000. The estimated residual value is $4,000. The laser has a useful life ofsix years and the clinic expects to use it 10,000 hours. It was used1,600 hours in year 1;2,100 hours in year 2; 2,400 hours in year 3: 1,400 hours in year 4: 2,000 hours in year 5; 500 hours in year 6.
(a) Calculate the annual depreciation for each of the six years under each of the following methods:l (1) straight-line. (2) units-of-production (service)
(b) If you were the administrator ofthe clinic, which method would you select as the most appropriate? Justify your answer.
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 six-year period?