Advanced Automotive paid $200,000 for a group purchase of land, building, and equipment. At the time of the acquisition, the land had a market value of $105,000, the building $63,000, and the equipment $42,000. Journalize the lump-sum purchase of the three assets for a total cost of $200,000, the amount for which the business signed a note payable. (Record a single compound journal entry. Record debits first, then credits. Select the explanation on the last line of the journal entry table.)
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.
Advanced Automotive paid $200,000 for a group purchase of land, building, and equipment. At the time of the acquisition, the land had a market value of $105,000, the building $63,000, and the equipment $42,000. Journalize the lump-sum purchase of the three assets for a total cost of $200,000, the amount for which the business signed a note payable. (Record a single compound
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