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On January 2, 2011, Kinnard Hospital purchased a $104,150 special radiology scanner from Faital Inc. The scanner has a useful life of 5 years and will have no disposal value at the end of its useful life. The straight-line method of depreciation is uded on this scanner. Annual operating costs with this scanner are $104,150.
Approxiamately one year later, the hospital is approached by Harmon Technology salesperson, Jane Black, who indicated that purchasing the scanner in 2011 from Fital Inc. was amistake. She points out that Harmon has scanner that will save Kinnaird Hospital $27,600 a year in operating over its 4 year useful life. She notes that the new scanner will cost $120,900 and has the same capabilities as the scanner purchased last year. The hospital agrees thar both scanners are of equal quality. The new scanner will have no disposal value. Black agrees to buy the old scanner from Kinnaird Hospital for $27,770.
Using incremental analysis determine if Kinnaird Hospital should purchase the new scanner on January 2, 2012. Enter cost amounts as positive in the columns retain scanner and replace scanner to enter salavage value amount in columns retain scanner and replace scanner use either a negative sign preceding the number.
- Retain scanner replace canner net income
- Annual operating cost
- New scanner cost
- Old scanner salvage