Question

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.

Short answer

Answer

Depreciation base is $26,300.

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.

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