Saginaw entity recently ordered a brand-new HVAC system which will last ten years. Saginaw entity has been using the same building for 40 years. Saginaw estimates that the building will last an additional ten years from the date that the HVAC system was installed. The HVAC system should be depreciated jointly with the building.

Question

Quizplus · Accepted Answer

The HVAC system and the building are separate assets with potentially different useful lives and should be depreciated separately according to their individual estimated useful lives, unless the HVAC system is so integrated into the building that it cannot be removed or replaced, in which case it might be considered part of the building structure. However, based on the information given, it's more appropriate to depreciate them separately, especially since the HVAC system has a specified useful life independent of the building's remaining useful life.

Saginaw Entity Recently Ordered a Brand-New HVAC System Which Will