Cyber Manufacturing purchased a complete video borescope system for applications that require work in places where eyes cannot see. The purchase price was $18,000, shipping and delivery was $300, installation cost was $1200, tax recovery period was 7 years, estimated useful life was 10 years, salvage value was nil, and annual operating cost was $45,000 per year. For tax depreciation purposes, what are the values of B, S, and n that should be used in depreciating the asset?
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.
Cyber Manufacturing purchased a complete video
borescope system for applications that require
work in places where eyes cannot see. The purchase
price was $18,000, shipping and delivery
was $300, installation cost was $1200, tax recovery
period was 7 years, estimated useful life was
10 years, salvage value was nil, and annual operating
cost was $45,000 per year. For tax
purposes, what are the values of B, S, and n that
should be used in depreciating the asset?
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