On January 2, 2019, Assisi Hospital purchased a €100,000 special radiology scanner from Bella SpA. The scanner had a useful life of 4 years and was estimated to have no residual value at the end of its useful life. The straight-line method of depreciation is used on this scanner. Annual operating costs with this scanner are €105,000. 

Approximately one year later, the hospital is approached by Dyno Technology salesperson, Anthony Ricci, who indicated that purchasing the scanner in 2019 from Bella SpA was a mistake. He points out that Dyno has a scanner that will save Assisi Hospital €25,000 a year in operating expenses over its 3-year useful life. Anthony notes that the new scanner will cost €110,000 and has the same capabilities as the scanner purchased last year. The hospital agrees that both scanners are of equal quality. The new scanner will have no disposal value. Anthony agrees to buy the old scanner from Assisi Hospital for €50,000.

Instructions

a. If Assisi Hospital sells its old scanner on January 2, 2020, compute the gain or loss on the sale. 

b. Using incremental analysis, determine if Assisi Hospital should purchase the new scanner on January 2, 2020.

c. Explain why Assisi Hospital might be reluctant to purchase the new scanner, regardless of the results indicated by the incremental analysis in (b).