Reference no: EM133128465

Question - Everhealthy Hospital (EH), a private hospital in Malaysia, started performing robotics surgery, thus purchased robotics equipment from Malaysian Robotech Berhad (MBB) on 1 September 2021. The total purchase cost of the equipment was RM 480,000. Subsequently, the hospital has to pay MBB RM 3,000 per year for maintenance of the robotics equipment. The useful life of the equipment is expected to be 9 years, at the end of which MBB will give a trade-in value of RM55,000 for the robotics equipment.

In order to use the robotics equipment, EH had to purchase a software programme from MBB for RM 45,000. The equipment will not work without the programme. The cost of RM 45,000 for the programme is inclusive of the software's licence fee for the first year. The licence fee is RM 20,000 per annum, which has to be renewed annually.

MBB explained to EH that the software programme gathers data during the robotics surgery not only from EH but also from other hospitals with the same equipment. Hence, the software has gathered a database of medical information which is useful to doctors and beneficial to the hospitals that purchase the software. Thus, the longer the software is used, it actually has more value than its initial cost. However, EH and other hospitals are restricted from selling all or part of the software and any information collected by the software to other parties.

Required -

(a) Calculate the net book value of the robotics equipment as at 31 December 2021, if depreciation is calculated on a monthly pro-rata basis in the year of purchase by Ever healthy Hospital [Note: Clearly indicate which costs should be included in calculating the initial costs of the robotics equipment].

(b) If the software becomes more valuable through usage, discuss whether Ever healthy Hospital should revalue the value of the software each year. Provide strong justification(s) for your answer.