Corp purchased a new machine $100,000, paid $10,000 for shipping and paid $5,000 to have it installed. Economic life is 6 years and salvage value is $25,000. What’s the difference between straight line and DDB in the second year of the asset life? Now this is where I got it wrong. Schweser insisted that 10,000 & 5,000 to be added to the 100,000 when calculating the initial cost. Is this right? The book value of the asset would be 100,000 right? The 10,000 shipping and 5,000 installation fee shouldn’t be included in the book value. Or should it?
placement costs are capitalized into the BV of the asset. so PP&E gross is $115,000 and you amortize/ depreciate the asset over its useful life