Q1. Norwalk Hospital bought a new state of the art x-ray machine at the beginning of the year at a cost of $140,000. Transportation and installation costs to get the machine delivered and functioning in the hospital's radiology department amounted to $20,000. The equipment's estimated useful life is 3 years and the residual or salvage value is $10,000.
a.) Using the Straight Line Method, calculate the Depreciation Expense and Book Value of the x-ray machine that would be recorded at the end of each of the 3 years of its useful life. Provide your answers and show your work in the table below.
b.) Double Declining Balance Method
Using the Double Declining Balance Method, calculate the Depreciation Expense and Book Value of the x-ray machine that would be recorded at the end of each of the 3 years of its useful life. Provide your answers and show your work in the table below.
c.) Units of Production Method
Using the Units of Production Method, calculate the Depreciation Expense and Book Value of the x-ray machine that would be recorded in each of the 3 years of its useful life.
The estimated x-rays expected from the equipment over its useful life is 30,000.
The actual number of x-rays expected each year is:
Year 1 5,000 units
Year 2 15,000 units
Year 3 10,000 units
Provide your answers and show your work in the table below.
Q2. Using which of these three depreciation methods will the hospital show the largest net income (profit) on their income statement for the second year (only for year #2, not years 1 and 2 combined).
Q3. Calculate the gain or loss for all of the 3 depreciation methods if the hospital sells the x-ray machine at the end of the second year for $65,000. (Show your 3 answers and calculations below.)