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Question 1:

In 2018, the Port of Spain General Hospital purchases a scanner at a cost of $ 100,000. The scanner has a useful life of 5 years with no residual value. It is depreciated using the straight line method and its annual operating costs are $ 120,000.

In 2019 the hospital is approached by another supplier to purchase a more modern machine for $ 115,000. This new machine has a life span of 4 years and will save $ 25,000 in annual operating costs. The new supplier is willing to buy the old scanner for $ 30,000.

Required:

1. Compute the gain or loss if the old scanner is replaced in 2019. 5 Marks
2. Advise the hospital on the purchase of the new scanner. 10 Marks