warranties on new equipment

[oceanlovin'ea]

Never had a client give me breakdown like this. Bought new camera and gave me price. She also purchased a warranty on the camera. She listed that too. Would you just depreciate just the cost of the camera? Then write off the warranty as an expense. Usually people just give you the total that is on their receipt which would include a warranty. I don't think anyone has ever broken it down before. Depreciate the total of the camera and warranty or just depreciate the camera and write off the warranty as an expense? Is it door #1 or door #2?

Guess my mind is a bowl of mushy jello at 9 pm on April 12th.

Thanks.

Linda, EA

[Openfire]

Linda, I think you could do either. How long is the warranty? Does the client want to do a standard depreciation, or a 179? I think you have some flexibility with this one. You could either depreciate it over the years of the warranty, or take it all in the current year, whichever is best for the TP.

[Gretel]

I had this with a car purchase. I believe a warranty that covers several years needs to be amortized over the warranty period.

[taxea]

I agree with Gretel. If warranty covers more than a year it needs to be amortized over the warranty period.