Capital Asset question

Sep 07, 2005 3 Replies
B

If the company purchases equipment that costs $5000, and the equipment is included as an expense in year 1, then the entire amount is written off.



In this scenario / case, would you include $5000 (equipment) in the Capital Asset account ? Then follow it up by the amount of accumulated amortization (which is the amount you can write off for the given year) at lets say $1000 ?



I suspect that since the entire amount was written off in year 1, then it can't be counted in the accumulated amortization or expenses.



But its still an asset isn't it ? What is wrong with this picture ?


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!

"What is wrong with this picture?" It's too cloudy, can't see anything clearly.

"Included as an expense in year 1" means precisely the same as "written off". So, WHY was it expensed in the first place? Was it "written off" AGAIN - TWICE?

If it was written off, then "NO", it's no longer an asset. But if it's still in use then WHY was it written off? If in use, it SHOULD be an asset and should NOT have been written off.

It can't be both "written off" and also still be an asset at the same time. As an asset - yes, $5,000 for the cost of the capital asset, with appropriate depreciation expense and accumulated depreciation.

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F

It IS still an asset (fixed asset), but the accumulated depreciation equals the original cost of the asset. No, it should not have been expensed twice. You can expense the full amount of the cost of the asset in the first year by using the Section 179 deduction if you are eligible by income limitation to do so.

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H

No, it's not an asset if it's been expensed.

Consider a pencil.

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