Lowery Inc. purchased new plant equipment on January 1, 2014. The company paid $920,000 for the equipment,

Question:

Lowery Inc. purchased new plant equipment on January 1, 2014. The company paid $920,000 for the equipment, $62,000 for transportation of the equipment, and $10,000 for insurance on the equipment while it was being transported. The company also estimates that over the equipment’s useful life it will require additional power, which will cause utility costs to increase $90,000. The equipment has an estimated of $50,000.
a. What amount should the company capitalize for this equipment on January 1, 2014?
b. What is the depreciation base of this equipment?
c. What amount will be depreciated over the life of this equipment?

Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...