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4 cards from this section. Quick, good the night before a test.
Define ownership cost.
Think about costs that are constant regardless of how much you use the equipment.
What is included in the initial cost of equipment?
Consider all expenses related to acquiring the equipment.
What are ownership costs?
Think about costs that do not vary with operation.
True or False: Operating costs are incurred whether the equipment is used or not.
Consider when costs are incurred.
A construction company purchases a backhoe for $120,000, with an expected salvage value of $15,000 and a useful life of 7 years. Calculate the annual depreciation using the straight-line method and discuss how this affects the overall project budgeting.
Use the straight-line formula you learned.
Explain the financial implications of choosing an accelerated depreciation method versus a straight-line method for a newly acquired piece of equipment worth $75,000 with a salvage value of $5,000 over a useful life of 10 years.
Compare the benefits and drawbacks of each method in financial reporting.
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