When depreciating an asset do u also include the trade discount?

Question

So I need to depreciate an equipment worth $1,980,000 using reducing balance. It has a depreciate rate of 20% per annum. However there is a trade discount that has been received of 10%.

Do I need to discount the equipment and then depreciate or just straight away depreciate the original amount $1,980,000?

Answer 1

Your accounts will only balance if you capitalize $1,782,000 to equipment, since that's the amount you paid. When you calculate depreciation for the 1st year, you would take 20% x $1,782,000.