How can I respond to this? In your own opinion. In regards to land, the cash purchase price, any closing costs (title and attorneys fees), commissions for real estate brokers and accrued property taxes and other liens make up the complete cost. In regards to buildings, the purchase price, closing costs, commissions and costs for making the building ready like repairing the roof, floors, electrical wiring and plumbing make up the complete cost. Also, in constructing a new building, architect fees, building permits, and excavation costs make up the complete cost. For equipment, complete costs includes purchase price, sales taxes, freight charges, and insurance during transit as well as other things like assembling, installing, and testing the unit. There are three methods for depreciation. 1) Straight-line method this is the most common method and under this method, the depreciation expense is deducted evenly over the assets life. So if an asset cost 12,000 with a $0.00 salvage value and only has a useful life of 4 years then it would depreciate at 3000/year (12,000/4). This method is best used for the types of assets that give equal benefits over useful life which generally are those for which daily use does not affect productivity. Examples are office furniture and fixtures, buildings, warehouses, and garages for motor vehicles. 2) Declining balance method This method is also known as an accelerated-depreciation method because it results in higher depreciation in the early years of an assets life. This is a good method for companies to use when they suspect that an asset will depreciate quickly. 3) Units-of-activity method - Under this method, the useful life is expressed in terms of the total units of production or the use expected from the asset. The units-of-activity method is ideally suited to factory machinery: Companies can measure production in terms of units of output or in terms of machine hours used in operating the machinery. This method can also be used for items like delivery equipment or airplanes If I were a manager I would use the straight line method because it seems to be the easiest to deal with and it assigns a fixed percentage or fixed dollar amount. Under this method, depreciation expense for the year is known which can help with other predictions such as how depreciation will affect the tax rate and net income