Cala Manufacturing purchases land for $373,000 as part of its plans to build a new plant. The company pays $27,100 to tear down an old building on the lot and $40,061 to fill and level the lot. It also pays construction costs $1,204,400 for the new building and $76,025 for lighting and paving a parking area. Prepare a single journal entry to record these costs incurred by Cala, all of which are paid in cash.
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.
Cala Manufacturing purchases land for $373,000 as part of its plans to build a new plant. The company pays $27,100 to tear down an old building on the lot and $40,061 to fill and level the lot. It also pays construction costs $1,204,400 for the new building and $76,025 for lighting and paving a parking area. Prepare a single
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