## Related questions with answers

An energy production company has the following information regarding the acquisition of new gas-turbine equipment. Purchase price = $780,000. Trans-oceanic shipping and delivery cost =$4300. Installation cost (1 technician at $1600 per day for 4 days) =$6400. Tax recovery period = 15 years. Book depreciation recovery period = 10 years. Salvage value = 10% of purchase price. Operating cost (with technician) = $185,000 per year. The manager of the department asked your friend in Accounting to enter the appropriate data into the tax-accounting program. What are the values of B, n, and S in depreciating the asset for tax purposes that he should enter?

Solution

VerifiedB is the unadjusted basis or the first cost, it is

$\$780,000 + \$4,300 + \$6,400 = \$790,700.$

S is the estimated salvage value, in this case is

$0.1 \cdot \$780,000 = \$78,000.$

n is the recovery period, for tax purposes (in this task) it is 15 years.

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