Question

luster consulting company purchased a new heating and cooling system for their office building in march, 2014. after installing and testing the equipment, it was put into service on april 1, 2014. the total cost to put the equipment into service was $45,000; it is expected to have a useful life of 10 years and a salvage value of $5,000.

Answer 1

The amount of depreciation expense recorded in the books will be $3000.

The equipment's depreciable value is $40,000 ($45,000 cost - $5,000 salvage value), and the required number of years for depreciation is 10. In other words, the depreciation for a year is $4,000 ($40,000 / 10 years).

Since the equipment was first used on April 1, 2014, the amount of depreciation expense at December 31, 2014, will only cover the previous nine months.

Depreciable value includes installation costs and acquisition costs but not scrap value. The value that must depreciate in order to be incurred over the asset's useful life. The depreciable value of a fixed asset will be zero when its useful life is over.

When a corporation buys a fixed asset, it will be listed on the balance sheet in the appropriate section. Throughout its lifetime, as this object is used, it will lose value. Depreciable value is only the process of moving a balance from an asset to an expense on the income statement. The depreciable value and useful life will determine the Depreciable value expense. For instance, we spend 10,000 on equipment that we expect to last 5 years. This machine will be worthless in five years. As a result, the depreciation cost will be $2,000 year (10,000/5 years). This asset's balance sheet value will drop to zero at the end of the fifth year.

Learn more about Depreciable value here

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