How do you determine the cost of an asset?
Determine the asset's purchase price. Consider this the depreciable basis value. 4. Multiply the current depreciable basis by the depreciation rate to find the year's depreciation. 1  In the first year of use, the depreciation will be $400 ($1,000 x 40 percent).. Determine the expected life of the asset. 1  The asset life is used to determine the rate at which the depreciation will accrue. 2  Using the same example asset as above, assume a 5-year asset life. 1 The result is the amount of annual depreciation for that asset. 2  It will be accrued each year over the life of the asset. 3  Assuming a purchase price of $1,000, a salvage value of $200 and an asset life of 5 years, the annual depreciation under this method would be $160 per year (1000 - 200 = 800; 800 / 5 = 160).. Determine the expected life of the asset. 1  The asset life is used to determine the rate at which the depreciation will accrue. 2  Using the same example asset as above, assume a 5-year asset life. BREAKING DOWN 'Original Cost'. For example, the purchase price of a piece of equipment is $20,000. The purchase also involves $1,000 in fees, $700 in shipping and delivery costs, and $3,000 for installation and warranty.The original cost of this piece of equipment would be $20,000 + $1,000 + $700 + $3,000 = $24,700. Determining an asset's original cost is important in calculating the asset's tax basis.he purchase also involves $1,000 in fees, $700 in shipping and delivery costs, and $3,000 for installation and warranty. The original cost of this piece of equipment would be $20,000 + $1,000 + $700 + $3,000 = $24,700. The book value of the asset may be far different from the asset's fair market value. In the example above, the asset's book value at year 1 is $9,000. The asset may really be worth $15,000 or $3,000 on the open market. Depreciation is a cost allocation concept, not an estimate of fair value.n the example above, the asset's book value at year 1 is $9,000. The asset may really be worth $15,000 or $3,000 on the open market. Depreciation is a cost allocation concept, not an estimate of fair value. Subtract the accumulated depreciation from the asset's cost. To arrive at the book value, simply subtract the depreciation to date from the cost. In the example above, the asset's book value after 6 years would be (10,000 - 6000) or $4000.. Calculate the straight-line depreciation expense. This is used when the same amount is expensed each period until the asset is fully depreciated. For example, if a piece of equipment was purchased for $10,000, and it has an expected life of 10 years, then the annual depreciation expense would be $1000. An asset's book value equals the asset cost minus Accumulated Depreciation. If the cost is $10,000 and accumulated depreciation is $3,000, the book value is $7,000. An asset's depreciable cost equals the asset cost minus salvage value.Tony purchases a truck with cost of $20,000 and salvage value of $4,000. The depreciable cost would be $16,000.n the example above, the asset's book value at year 1 is $9,000. The asset may really be worth $15,000 or $3,000 on the open market. Depreciation is a cost allocation concept, not an estimate of fair value. 1. The value at which an asset is carried on a balance sheet. To calculate, take the cost of an asset minus the accumulated depreciation. 2. The net asset value of a company, calculated by total assets minus intangible assets (patents, goodwill) and liabilities.3. The initial outlay for an investment.. The value at which an asset is carried on a balance sheet. To calculate, take the cost of an asset minus the accumulated depreciation. 2. The net asset value of a company, calculated by total assets minus intangible assets (patents, goodwill) and liabilities. 1 It will be accrued each year over the life of the asset. 2  Assuming a purchase price of $1,000, a salvage value of $200 and an asset life of 5 years, the annual depreciation under this method would be $160 per year (1000 - 200 = 800; 800 / 5 = 160).. Determine the expected life of the asset. 1  The asset life is used to determine the rate at which the depreciation will accrue. 2  Using the same example asset as above, assume a 5-year asset life. Determine the acquisition cost of the asset. This figure represents the price of the asset plus any costs directly related to acquiring the asset, including transportation, storage or a commission. For example, assume the acquisition cost of the asset is $100,000.Step 2. Determine the expected salvage value of the asset. This figure represents the price you expect to sell the asset for at the end of its useful life.For example, assume an asset's salvage value is $20,000.or example, assume the acquisition cost of the asset is $100,000. Step 2. Determine the expected salvage value of the asset. This figure represents the price you expect to sell the asset for at the end of its useful life. In most situations, the basis of an asset is its cost to you. The cost is the amount you pay for it in cash, debt obligations, and other property or services. Cost includes sales tax and other expenses connected with the purchase.Your basis in some assets is not determined by the cost to you.he cost is the amount you pay for it in cash, debt obligations, and other property or services. Cost includes sales tax and other expenses connected with the purchase. Your basis in some assets is not determined by the cost to you.
1. The value at which an asset is carried on a balance sheet. To calculate, take the cost of an asset minus the accumulated depreciation. 2. The net asset value of a company, calculated by total assets minus intangible assets (patents, goodwill) and liabilities.3. The initial outlay for an investment