Benson Company acquired a machine that involved the following expenditures and related factors: Gross invoice price $38,000 Sales tax 1,425 Cash discount taken 570 Freight 675 Assembly of machine 900 Installation of machine 1,350 Assorted spare parts for future use 2,700 Tuning and adjusting machine before use 450 The initial accounting cost of the machine should be: Select one: a. $33,870 b. $42,230 c. $30,030 d. $32,730 e. None of the above
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.
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