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 10% 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 4 years of service.
What will be an ideal response?
B = $400,000
S = 0.1(300,000) = $30,000
Dt = (400,000 - 30,000)/8
= $46,250 per year t (t = 1, …, 8)
BV4 = 400,000 – 4(46,250) = $215,000
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