# Quiz 3

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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.

#1.

a.)    Straight-Line Method    (24 points)

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.

 Year Annual Depreciation Computation Annual Depreciation Expense Accumulated Depreciation Book Value 1 2 3

b.)    Double Declining Balance Method    (24 points)

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.

 Year Annual Depreciation Computation Annual Depreciation Expense Accumulated Depreciation Book Value 1 2 3

c.)     Units of Production Method    (24 points)

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

 Year Annual Depreciation Computation Annual Depreciation Expense Accumulated Depreciation Book Value 1 2 3

#2.   (14 points)

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).

#3.   (14 points)

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.)

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