Incremental Depreciation?

Question

If the total cost of something 4 years ago was 2,755,000 what would be its incremental depreciation using MACRS 5 yr? I thought it would be 2,286,650 (2755000 * (.20+.32+.19+.12)). But it isnt. Is incremental figured the same as regular depreciation? In the situation the company is considering purchasing some new buses and i need a figure to compare its incremental depreciation to. The solution they have is $324,000.

Answer 1

for one thing when you put the equipment into use it may not be the first of the year where you would take an entire year's depreciation

the date of use could be during the year where the amount of depreciation would be only a part of the full year's depreciation

the subsequent years would of course be full year until the last year when, again the equipment was not used the entire year when a partial amount of the depreciation would be claimed

Answer 2

Incremental Depreciation

Answer 3

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RE:

Incremental Depreciation?

If the total cost of something 4 years ago was 2,755,000 what would be its incremental depreciation using MACRS 5 yr? I thought it would be 2,286,650 (2755000 * (.20+.32+.19+.12)). But it isnt. Is incremental figured the same as regular depreciation? In the situation the company is considering...

Answer 4

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No, and it's not depreciation, either. What you're dealing with is the cost of the investment, not a material cash flow. (Of course it depends on what kind of investment you're talking about. Some pay an incremental interest, such as bonds paying out every six months, others only incur interest and let it accumulate.) Some investments (and some liabilities) are required to be kept on the books at NPV (net presesent value), and the amortization of them (not the depreciation) is simply a recognition of income or expense. It could be that the income or expense will actually never be received, but the recognition takes place anyway. For example, if you loan out money to another company interest free, you're required to charge yourself interest and call it income, and the other company is required to charge itself interest expense.