Buffalo Company purchased a machine on July 1, 2018, for $29120. Buffalo paid $208 in title fees and county property tax of $130 on the machine. In addition, Buffalo paid $520 shipping charges for delivery, and $494 was paid to a local contractor to build and wire a platform for the machine on the plant floor. The machine has an estimated useful life of 6 years with a salvage value of $3120.
Determine the depreciation base of Buffalo new machine. Blue uses straight-line depreciation.
Depreciation base $

The depreciation base is the term used to refer to the value of the asset that qualifies for depreciation. This is generally the cost of the asset less any amount for salvage value or residual value of the asset.

Depreciation base = Cost - Salvage value

We first need to determine the cost of the machine. The cost of the machine will include the purchase price of the machine plus any cost incurred to bring the machine into the condition and place of its intended use.

Thus, the cost of the machine will be,

Machine Cost

Purchase price 29120

Title fees 208

Property tax 130

Shipping charges 520

Site preparation cost 494

total cost 30472

Depreciation base = 30472 - 3120

Depreciation base = $27352