[Anonymous]

In March, the company purchased a molding machine for $36,000. In Year 2, the loan was paid down by $9,000. The molding machine is expected to last 9 years and has no salvage value.

For this part of the simulation, Becker wants you to calculate the following items. Pay attention to the depreciation for Year 2.

Becker Solution:

Depreciation Base: $36,000

Useful Life: 9 years

Annual Depreciation: $4,000

Depreciation for Year 2: $3,000. ($4,000 x 9/12. According to Becker, depreciation should begin in April…)

Why is the depreciation for Year 2 $3,000? Since the equipment was purchased in March, shouldn’t it be $3,333.33? ($4,000 x 10/12 = $3,333.33). Has anybody out here done this simulation in Becker? It is #3 of Simulation 1 for FAR chapter 4. Is there some rule that states if you don’t know when the equipment is purchased in a particular month, then you should use the depreciation of the next month?

I am so confused…..

[NYCaccountant]

Well you would not take a full months of depreciation in March anyway because the equipement was bought in March, not at the beginning on March. You would be lead to assume that the equipement was bought March 31st, which would give you an April start to the recognition of depreciation expense.

FAR - 93
REG - 87
BEC - 84!!!!
AUD - 99!!!!!! CPA exam complete.

[mla1169]

Is the SIM posted word for word above? I get a feeling there is something else missing. Maybe its something you didn't feel significant enough to type out but might hold a clue.

But NYC is right, you wouldn't depreciate a full month for March anyway. And as another factor depreciation starts on the placed in service date, not on the purchase date.

FAR- 77
AUD -49, 71, 84
REG -56,75!
BEC -75

Massachusetts CPA (non reporting) since 3/12.

[sbarkerACPA]

Re-read the directions. It states that the company depreciates the month after purchase.

BEC: 74;81
AUD: 77
REG: 71; 80
FAR: 78
License for CPA----APPROVED
CPA Class of 2013

[Anonymous]

Thank you everyone! SbarkerACPA is right; the question states that the company depreciates the equipment the month after its purchase.

[Author]

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