Depreciation & Expense

[bama1984]

Hello,

We've had some discrepancies on how to proceed with depreciating an asset. We are working on a project with a total cost of $117,312.81 for the asset to go into service. $105,312.81 can be capitalized and $12,000 should be expensed (removal of old equipment cost). Should the initial book value be charges that we can capitalize plus expenses related or just charged that we are able to capitalize? If we use the total cost for the initial book value, then the book value will never depreciate the expenses. Am I looking at this wrong?

 

[Triest123]

The removal of old equipment cost cannot be generated future revenue, so it should be expensed off

 

[LYAK]

If the removal of the old equipment is necessary for putting the new equipment into service, it should be capitalized. Any costs associated with bringing the asset to its condition and location, if measurable and identifiable, should be capitalized. Technically, the removal of the old equipment is generating future revenue by allowing the new asset to perform. That's my 2 cents.