Question

Suppose an owner pays $700 million to purchase a hockey team. The new owner claims that $500 million of this prices is for the players, which he can depreciate using straight-line depreciation in 4 years. If the team pays corporate profit taxes of 25 percent, how much does the depreciation of the players save the owner? Who first came up with this idea? Show all of your work.

Answer 1

Answer :

Cost of hockey team = $700 million

Amount out of total for the players = $500 million

Annual Depreciation using straight line method = 500/4 = $125 million

Annual Cost saving due to depreciation = 125*25% = $31.25 million

Total savings in 4 years = $31.25*4 = $125 million

Originality:

“Human depreciation”, used by the Steel Industry Board in 1949 to assign responsibility to employers for the depreciation of their human assets, has been left unexamined despite being cited as one of the greatest contributors to the growth of industrial pensions in the USA. The study examines accounting as an interface among and between the organizational and “non-accounting” spheres.