Question

Equipment was purchased for $50,000 plus $2,500 in freight charges. Installation costs were $1,500 and sales tax totaled $1,000. Hiring a special consultant to provide advice during the selection of the equipment cost $3,000. What is this assetâs depreciable basis?a. $58,000b. $57,000c. $51,000d. $55,000

Answer 1

It would be A!
Explanation: $50,000(equipment)+$2,500(freight charges)+$1,500(installation cost)+$1,000(sales tax)+3000(cost to hire special consultant=58,000

Answer 2

The equipment's depreciation basis is a. $58,000.

The depreciation basis of an long-term asset is calculated by subtracting the residual or salvage value from the acquisition costs.

The acquisition costs usually include the purchase price of the asset, plus all the costs incurred to put the asset into use.

Thus, the asset's depreciable basis is $58,000.

Data and Calculations:

Purchase price of equipment = $50,000

Freight charges = $1,500

Installation costs = $1,500

Sales tax = $1,000

Consultant's fee = $3,000

Total acquisition costs = $58,000

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