Amortization

Amortization is basically the same as depreciation except that it applies to intangible property, such as franchises, designs, drawings, or research expenses. Generally straight-line depreciation methods must be used, and only certain items that are amortized can be deducted as expenditures for federal income tax purposes. The value of goodwill, trademarks, and trade names generally cannot be amortized. 

If a company mines an ore, has an oil or gas well, or cuts timber, the company may be entitled to a depletion allowance on its income tax. A depletion allowance is 

A company operating an oil well has a gross income of 100,000,000 and expenses totaling 28,000,000. Assuming a 48% income tax rate, calculate the income taxes paid by the company. 

Since this is greater than 22,000,000 the total depletion allowance can be taken. Income tax paid = ( 72,000,000 22,000,000)0.48 = 24,000,000 

The savings in federal income tax by using the depletion allowance is 

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Price. The 1993 U.S. price for fluorine in cylinders was 109/kg for 2.2 kg and 260/kg for 0.7 kg cylinders. The price in large volumes is determined by (/) the price of hydrofluoric acid (2) power costs, ca 4.5 kWh electricity is required for each kilogram of fluorine produced (J) labor costs (4) costs to maintain and rebuild cells and (5) amortization of fixed capital. Fluorine production is highly capital intense. In addition, purification, compression, packaging, and distribution in cylinders increase the cost significantly. 

Seawater Evaporators The production of potable water from saline waters represents a large and growing field of application for evaporators. Extensive work done in this field to 1972 was summarized in the annual Saline Water Conversion Repoi ts of the Office of Sahne Water, U.S. Department of the Interior. Steam economies on the order of 10 kg evaporation/kg steam are usually justified because (1) unit production capacities are high, (2) fixed charges are low on capital used for pubhc works (i.e., they use long amortization periods and have low interest rates, with no other return on investment considered), (3) heat-transfer performance is comparable with that of pure water, and (4) properly treated seawater causes httle deterioration due to scahng or fouhng. 

Cl = amortization rate for tower, doUars/(ft plate year)... 

The start-up costs are usually included in the capital cost of the project. For tax purposes they are often amortized over 5 to 10 years. 

Amortization. Items of expense incurred before start-up can be accumulated and amortized during the first five or ten years of plant operations. The tax laws and corporate policy on w hat profit to show can influence the number of years for amortization. 

Current tax laws allow deductions from revenues for sales expenses, operating costs, amortizations, lease costs, interest payments, depreciation, and depletion. 

As can be seen in Table 2 all revenues less expenses associated with selling are summed in Row 17. All expenses including noncash expenses such as depreciation, amortization, and depletion are summed in Row 30. The net profit before tax, Row 32, is obtained by subtracting Row 30 from Row 17 and making any inventory adjustment required. Row 34 is the cash taxes that are to be paid unless offset by investment or energy tax credits in Row 36. The deferred income tax is shown in Row 35. The deferred tax decreases the net profit after tax in the early years and increases the net profit after tax in later years. The impact on cash flow is just the other way around as discussed later. Row 37, profit after tax, is obtained as foliow s ... 

The at speed balance (high speed balance) facility was originally used in Europe and is a rather sophisticated and costly installation. Time on the machine is expensive, partly due to the owner having a large investment to amortize and partly because the machine requires more than just an operator. 

Since power is a substantial component of the fixed operating cost of a unit, the operating cost would run approximately seven times more on a scrubber installation. The installation costs of a hot-rolled steel precipitator to handle 100,000 cfm would be between 3.50 and 4.50/cfm as opposed to 1.40 to 1.80/cfm for a venturi scrubbing system. Although the initial capital expenditure is high for the precipitator, if the total operating and capital costs are amortized over an acceptable period of time, 8 to 10 years, the precipitator will prove to be the. lore economically feasible choice because of its low operating and maintenance costs. 

Fixed capital investments are characterized by the fact that they have to be replaced after a number of years commonly referred to as service life or useful life period. This replacement is not necessarily due to wear and tear of equipment. Other factors include technological advances that may render the equipment obsolete. Furthermore, over the usefiil life of the equipment, the plant should plan to recover the capital cost expenditure. In this regard, the notion of depreciation is useful. Depreciation or amortization is an annual allowance which is set aside to account for the wear, tear, and obsolescence of a process such that by the end of the useful life of the process, enough fund is accumulated to replace the process. The simplest method for determining depreciation is referred to as the straight line method in which... 

ArndbOt /. (Zodl.) amoeba, ameba. amorph, amorpbiacht a. amorpho js. amortisieren, v.t. amortize. 

Using the several materials selected and the basic design possibilities, products should be designed to meet the criteria as far as deflection is concerned, and the cost of manufacture estimated. If the designer does not have this type experience it is best done with the assistance of the fabricator who will fabricate the product. In addition to the material cost and the production labor costs, the amortization costs of the tools are to be included. 

In a production line that has a relatively long run, the cost for equipment in relationship to producing the product including its financial amortization, usually is about 5% with probably maximum of 10% Plastic material cost could be at about 50% with as high as 80% for high volume production. The other costs include power, water, labor, overhead and taxes. With precision, short runs, costs could be equipmentwise at 20 to 30%, material 45 to 50%. Thus, as it is usually stated, do not buy equipment just because it cost less since more profit could occur with the more expensive equipment study what is to be purchased. Of course the reverse is possibly true. So, you the buyer, have to know what you want and are ordering to a specification properly determined based on the designed product requirements. 

Table 4.6. Cost Components for UV and HPLC Measurements the Numbers Give the Necessary Time in Hours amortization of the Equipment and Infrastructure is Assumed to be Included in the Hourly Rates...

As equipment and supplies arrive, the laboratory operator will be contacted by the accountant, who will want to know which items are to be capitalized and how they are to be amortized. This is very important for tax purposes. Rapid amortization will usually offer many advantages, but IRS will question write-offs that seem to be too quick. 

Establishing a budget is simpler in a testing laboratory. When the cost of a certain analysis is calculated, however, some items are often overlooked. Of course, it will include man-hours needed. If an instrument is used, the cost of its amortization and maintenance must be figured. If the analysis is non-standard, there is the cost of developing the proper method. The cost of... 

Comparatively, the modified reduction-flotation system will have lower annual total cost (amortized capital cost plus O M cost) and will require less space, because the flotation unit is very shallow in depth and thus can be elevated. It is expected, however, that the treatment efficiency of the modified system will be higher due to the fact that the DAF clarifier can separate not only the suspended solids but also organics such as oil and grease, detergent, and so on.57-58-61 Conventional sedimentation clarifiers can separate only insoluble suspended solids. 

Depreciation, amortization, depletion, and investment credit are all factors that affect the taxes a company must pay, and hence the profit that can be made. When the government wishes industry to change its direction, it can manipulate these factors to make certain options more profitable. The engineer must be aware of these changes, since they can be the deciding factor on whether a project should be continued. 

Depreciation and amortization are means of recovering your investment in property that has a useful life of more than a year and is used in your trade or business or held for the production of income. 1... 

Source Depreciation, Investment Credit, Amortization, Depletion, Internal Revenue Service Publica-... 

Depredation, Investment Credit, Amortization, Depletion, Internal Revenue Service Publication 534 (10-69),U. S. Government Printing Office, Washington, D.C., 1969. 

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