What are the implications for current-year net income

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Question - The Beauty Clinic purchased a new surgical laser for $120,000. The estimated residual value is $4,000. The laser has a useful life of five years and the clinic expects to use it 10,000 hours. It was used 1,600 hours in year 1; 2,200 hours in year 2; 2,400 hours in year 3; 1,800 hours in year 4; 2,000 hours in year 5.

The Beauty Clinic is doing significant work to maintain a competitive position in its market by always using the most recent technology for its equipment. It is not sure whether it should capitalize these costs or expense them. What do you think it should do? What are the implications for current-year net income and for future years of expensing versus capitalizing these costs?

Reference no: EM133091409

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