How would you solve this question?

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Brendan Clifford

November 09, 2022 00:50

A mechanical engineer has proposed two different HVAC systems for a new project. Either system is suitable for the project type and location, but for tax purposes, the owner prefers a higher HVAC equipment depreciation cost over the lifecycle of the system. System A is a forced air heating and cooling system with an upfront cost of $10,000, an anticipated useful life of 20 years, and a salvage value of $1,000. System B is an electric packaged terminal unit with an upfront cost of $7,500, an anticipated useful life of 15 years, and a salvage value of $1,500. 

 

What is the annual depreciation of the system with the higher per year depreciation?

	$400

	$450

$500

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  Gang Chen November 09, 2022 04:57

  System A:

  (upfront cost of $10,000- a salvage value of $1,000)/ anticipated useful life of 20 years=$450

  System B:

  (upfront cost of $7,500- salvage value of $1,500)/ anticipated useful life of 15 years=$400

  The owner prefers a higher HVAC equipment depreciation cost over the lifecycle of the system, so $450 is the correct answer.

  Gang Chen, Author, AIA, LEED AP BD+C (GreenExamEducation.com)

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