An energy production company has the following information regarding the acquisition of new gas-turbine equipment. Purchase price = $760,000 Transoceanic shipping and delivery cost = $4,300 Installation cost (1 technician at $1,600 per day for 4 days) = $6,400 Tax recovery period = 16 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? The value of B is determined to be $ __. The value of S is determined to be $ __ The value of n is determined to be ___ years.
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 gas-turbine equipment.
Purchase price = $760,000
Transoceanic shipping and delivery cost = $4,300
Installation cost (1 technician at $1,600 per day for 4 days) = $6,400
Tax recovery period = 16 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?
The value of B is determined to be $ __.
The value of S is determined to be $ __
The value of n is determined to be ___ years.
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