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Use the Following Information to Answer the Questions Below

question 9

Multiple Choice

Use the following information to answer the questions below.
In the process of long-range planning at Rocky Mountain Hospital, Health Information Services defined its future business opportunities.A commitment was made to an optical imaging system and service to be implemented at the first of the year.The system would have the capacity for serving physician offices through a space rental and service program in addition to meeting the needs of the department.It was estimated by the health information manager that the hardware and software components of the optical imaging system would cost approximately $100,000 (with an estimated useful life of 5 years) , and a 3-year lease for one van (with a useful life of 5 years) would cost $7000 annually.The goal was to service 100 offices the first year, 200 offices the second year, and 300 offices the third and successive years at $150 a month.The accounting department uses straight-line depreciation; that is, equal amounts of depreciation expenses are recognized for each year the asset is assumed to be used.
-Because the revenue from the approved imaging system will be significant, the Health Information Services department will now be considered an indirect cost department.

Definitions:

Full-cost Method

An accounting practice where all direct and indirect costs of producing an asset are capitalized and then amortized over time.

IFRS

IFRS stands for International Financial Reporting Standards, a set of accounting standards developed by the International Accounting Standards Board (IASB) that is globally recognized for preparing financial statements.

GAAP

Widely recognized accounting norms and criteria in the U.S. that guide financial statements.

Property, Plant, Equipment

Long-term tangible assets used in the operation of a business and not expected to be converted to cash in the short term.