Blossom Company was organized on January 1. During the first year of operations, the following plant asset expenditures and receipts were recorded in random order. Debit 1. Cost of filling and grading the land $ 3,500 2. Full payment to building contractor 691,500 3. Real estate taxes on land paid for the current year 4,500 4. Cost of real estate purchased as a plant site (land $118,000 and building $44,000) 162,000 5. Excavation costs for new building 31,000 6. Architect’s fees on building plans 12,000 7. Accrued real estate taxes paid at time of purchase of real estate 1,000 8. Cost of parking lots and driveways 15,000 9. Cost of demolishing building to make land suitable for construction of new building 25,500 $946,000 Credit 10. Proceeds from salvage of demolished building $ 3,500 Analyze the foregoing transactions using the following column headings. Insert the amounts in the appropriate columns. For amounts entered in the Other Accounts column, also indicate the account titles. (If an amount reduces the account balance then enter with a negative sign preceding the number, e.g. -15,000 or parenthesis, e.g. (15,000).)
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.
Blossom Company was organized on January 1. During the first year of operations, the following plant asset expenditures and receipts were recorded in random order.
|
Debit |
||||
|---|---|---|---|---|
|
1. |
Cost of filling and grading the land |
$ 3,500 | ||
|
2. |
Full payment to building contractor |
691,500 | ||
|
3. |
Real estate taxes on land paid for the current year |
4,500 | ||
|
4. |
Cost of real estate purchased as a plant site (land $118,000 and building $44,000) |
162,000 | ||
|
5. |
Excavation costs for new building |
31,000 | ||
|
6. |
Architect’s fees on building plans |
12,000 | ||
|
7. |
Accrued real estate taxes paid at time of purchase of real estate |
1,000 | ||
|
8. |
Cost of parking lots and driveways |
15,000 | ||
|
9. |
Cost of demolishing building to make land suitable for construction of new building |
25,500 | ||
| $946,000 | ||||
|
Credit |
||||
|
10. |
Proceeds from salvage of demolished building |
$ 3,500 |
Analyze the foregoing transactions using the following column headings. Insert the amounts in the appropriate columns. For amounts entered in the Other Accounts column, also indicate the account titles. (If an amount reduces the account balance then enter with a negative sign preceding the number, e.g. -15,000 or parenthesis, e.g. (15,000).)
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Item |
Land |
Buildings |
Other Accounts |
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|---|---|---|---|---|---|---|---|
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enter a dollar amount | enter a dollar amount | enter a dollar amount | select an account title | |||
| $enter a total amount | $enter a total amount |
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