1. Fixed asset cost.

IRS acquired some used computer equipment. Installation, $8K, Repair costs prior to use, $9K, the purchasing manager, with a salary of $54K spent one month evaluating equipment and completing the transaction. The invoice cost was $400K. The seller paid its salesman a commission of 4% and offered the buyer a 2% discount if paid with 60 days. Freight costs were $4K. Repairs during the first year of use were $10K. The IRS borrowed $300K at 10% to pay for the equipment. What the equipment cost?

2. Basket Purchase.

XYZ acquired a building and land for $720,000 from a local gas station that had failed. The tax assessor had placed an assessed valuation of $200,000 on the land and $400,000 on the building as of January 1 of the current year. Record the entry for the purchase of the property.

3. CDE bought equipment for $40,000. It has a five year life and a $5,000 residual value. Calculate depreciation using straight-line and DDB. What makes DDB a desirable depreciation method?