manufacturer of aerospace products purchased four flexible assembly cells for $530,000 each. Delivery and insurance charges were $39,000, and installation of the cells cost another $50,000. a. Determine the cost basis of the four cells. b. What is the class life of the cells? c. What is the MACRS depreciation in year four?
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.
A manufacturer of aerospace products purchased four flexible assembly cells for $530,000 each. Delivery and insurance charges were $39,000, and installation of the cells cost another $50,000.
a. Determine the cost basis of the four cells.
b. What is the class life of the cells?
c. What is the MACRS
d. If the cells are sold to another company for $150,000 each at the end of year seven, how much is the recaptured depreciation?
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