Inventory to fixed Assets Depreciation

Jun 18, 2014
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Inventory to fixed Assets Depreciation
I want to transfer 7 year old Inventory item to fixed Assets. The Fixed asset category has 10 year useful economic life. How to calculate the Depreciation for the forgone years? Do I have to charge in this year?



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May 12, 2011
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United States
You do not have depreciation for the foregone 7 years because the inventory was not a fixed asset during those years. For the past 7 years you should have been determining the market value of the inventory and writing the inventory down to lower of cost or market value each year. You also do that before you move the inventory into the fixed asset category. At that point to determine the remaining life of the fixed asset you must be logical and take into account the type of asset you have. A steel desk would have longer useful life than say a laptop computer. Note that your 10 year policy assumes the fixed asset is new and your inventory is not new. So that is why you need to estimate remaining useful life.
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