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Q11-5BE

Expert-verified
Intermediate Accounting (Kieso)
Found in: Page 584

Short Answer

Cominsky Company purchased a machine on July 1, 2018, for $28,000. Cominsky paid $200 in title fees and county property tax of $125 on the machine. In addition, Cominsky paid $500 shipping charges for delivery, and $475 was paid to a local contractor to build and wire a platform for the machine on the plant floor. The machine has an estimated useful life of 6 years with a salvage value of $3,000. Determine the depreciation base of Cominsky’s new machine. Cominsky uses straightline depreciation.

Answer

Depreciation base is $26,300.

See the step by step solution

Step by Step Solution

Step-by-Step SolutionStep 1: Meaning of Depreciation

Depreciation can be stated as a decline in the value of an asset over a useful period. All assets depreciate over time, except for land, whose value increases with the passage of time. Among various methods of depreciation, straight-line depreciation is considered to be the simplest and error-free method.

Step 2: Determining the depreciation base of Cominsky’s new machine

Cost of machine

$28,000

Add: Title fees

$200

Property tax

$125

Shipping charges

$500

Paid to contractor

$475

$29,300

Less: Salvage value

$3,000

Depreciation base

$26,300

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