An energy production company has the following information regarding the acquisition of new gasturbine equipment. Purchase price = $780,000 Trans-oceanic shipping and delivery cost = $4300 Installation cost (1 technician at $1600 per day for 4 days) = $6400 Tax recovery period = 15 years Book depreciation recovery period = 10 years Salvage value = 10% of purchase price Operating cost (with technician) = $185,000 per year The manager of the department asked your friend in Accounting to enter the appropriate data into the tax-accounting program. What are the values of B, n, and S in depreciating the asset for tax purposes that he should enter?
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
An energy production company has the following
information regarding the acquisition of new gasturbine
equipment.
Purchase price = $780,000
Trans-oceanic shipping and delivery cost = $4300
Installation cost (1 technician at $1600 per day
for 4 days) = $6400
Tax recovery period = 15 years
Book
Salvage value = 10% of purchase price
Operating cost (with technician) = $185,000
per year
The manager of the department asked your friend
in Accounting to enter the appropriate data into the
tax-accounting program. What are the values of B,
n, and S in depreciating the asset for tax purposes
that he should enter?
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