Question

A new piece of equipment costs $15,000. Your accountant says the equipment can be depreciated each year by 8% for tax purposes. What value will the company show on the tax return after 5 years?

Answer 1

The equipment can be depreciated by 8% each year, which means that the value of the equipment will be reduced by 8% each year.

After the first year, the value of the equipment will be:

$15,000 - (8% x $15,000) = $13,800

After the second year, the value of the equipment will be:

$13,800 - (8% x $13,800) = $12,744

After the third year:

$12,744 - (8% x $12,744) = $11,730.72

After the fourth year:

$11,730.72 - (8% x $11,730.72) = $10,755.27

After the fifth year:

$10,755.27 - (8% x $10,755.27) = $9,786.12

Therefore, the value that the company will show on the tax return after 5 years is $9,786.12.