c. Asset Replacement An uninsured boat costing $90,000 was wrecked the first day it was used.It can be either sold as-is for $9,000 cash and replaced with a similar boat costing $92,000 orrebuilt for $75,000 and be brand new as far as operating characteristics and looks are concerned.Required What should be done? Include a consideration of both financial and strategic factors.
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.
c. Asset Replacement An uninsured boat costing $90,000 was wrecked the first day it was used.
It can be either sold as-is for $9,000 cash and replaced with a similar boat costing $92,000 or
rebuilt for $75,000 and be brand new as far as operating characteristics and looks are concerned.
Required What should be done? Include a consideration of both financial and strategic factors.
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