[Sherrid]

Becker F4 Depreciable Assets and Depreciation question 16/18 CPA 05913

The question asks for the depreciable base that should be used for the second owner of the asset. The purchase price is not

provided but relevant information pertaining to the original owner is.

Original owner: Cost $135,000 – $10,000 = $125,000 (depreciable base )

After $15,000 of depreciation expense is taken a new owner acquires the property.

Cost of 135,000-15,000 = 120,000 carrying value on old owner’s books

New owner acquires the asset and estimates the salvage value to be 15,000. I used the BV of 120,000

and deducted salvage estimated by new owner’s of 15,000 to come up with a 105,000 depreciable base.

Becker used the original cost to the old owners. When a purchase price is not given should I assume the cost of

the asset to the new owner’s is that of the original owner’s?

Any help is greatly appreciated.

[Hustle Darling!]

I think there is distractor information in this problem. When I look at this question I get that the “manufacturing firm” is the new owner. The manufacturing firm (new owner) purchased used equipment for $135,000. Thus, the depreciable base is 135,000 (cost) less 15,000 (new salvage value).

Roger CPA Review
FAR - 5/31/16

[Sherrid]

Thanks! I reread the question and you're absolutely right. I read the question too fast…it's good practice for the exam though. Thanks again.

[Author]

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