ABC Co purchased an equipment from Hongkong for P100,000. Additional cost included the following: Broker's commission P5,000 Import duties P30,000 Freight on purchase P1,000 Installation cost P3,500 Testing of equipment prior to use P5,000 Promotion and advertising cost of the new product to be processed in using the new equipment, P8,000 Samples generated from testing the equipment were sold for P500. How much is the initial cost of the equipment? 100,000 144,000 144,500 152,000
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
ABC Co purchased an equipment from Hongkong for P100,000. Additional cost included the following:
Broker's commission P5,000
Import duties P30,000
Freight on purchase P1,000
Installation cost P3,500
Testing of equipment prior to use P5,000
Promotion and advertising cost of the new product to be processed in using the new equipment, P8,000
Samples generated from testing the equipment were sold for P500.
How much is the initial cost of the equipment?
100,000
144,000
144,500
152,000
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