i have a question on business?

Question

XYZ Company purchased a piece of equipment that is expected to be useful to the company for 5 years. The President of XYZ wants to expense the full cost of the equipment in the year it is purchasedbut the Vice President says that this is not appropriate according to the Generally Accepted Accounting Principles

Answer 1

This looks like your accounting homework.

The VP is correct. The item should be depreciated over the course of its expected life to be in accordance with GAAP. (There are various depreciation methods to choose from but it should be depreciated over the 5 year useful life) This is a long term asset and it would be inappropriate to expense it at the time of purchase.

Answer 2

So what's your question, bud? I don't get it. You didn't state a question. You staged a scenario.

However, what the VP says is correct. A company would normally try and gather the money before the expense, with a very tight time of return for the investment. The sooner you can break even on the investment, the better. It means everything you get from that machine will then be profit.

Answer 3

The VP is right you cannot deprecitate all the assets in one year. It has to be depreciated throughout it's life in direct depreciation method or you have to use other methods like some of the year digits or other depreciation methods. Any way you cannot depreciate the entire asset in one year according to GAAP of FASB.