Cullumber Company manufactures routers used in industrial modems. On May 15, 2017, Cullumber purchased a precision welding machine at a retail price of $98,400. Cullumber paid 5% sales tax on this purchase and hired a contractor to build a “clean” platform enclosure for the machine for $7,350. Cullumber estimates the machine will have a 5-year useful life, with a salvage value of $8,200 at the end of 5 years. Cullumber uses straight-line depreciation and employs the “half-year” convention in accounting for partial-year depreciation. Cullumber’s fiscal year ends on December 31. At what amount should Cullumber record the acquisition cost of the machine? Acquisition cost of the machine $enter The Acquisition cost of the machine in dollars
Cullumber Company manufactures routers used in industrial modems. On May 15, 2017, Cullumber purchased a precision welding machine at a retail price of $98,400. Cullumber paid 5% sales tax on this purchase and hired a contractor to build a “clean” platform enclosure for the machine for $7,350. Cullumber estimates the machine will have a 5-year useful life, with a salvage value of $8,200 at the end of 5 years. Cullumber uses straight-line depreciation and employs the “half-year” convention in accounting for partial-year depreciation. Cullumber’s fiscal year ends on December 31. At what amount should Cullumber record the acquisition cost of the machine? Acquisition cost of the machine $enter The Acquisition cost of the machine in dollars
Chapter1: Financial Statements And Business Decisions
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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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Cullumber Company manufactures routers used in industrial modems. On May 15, 2017, Cullumber purchased a precision welding machine at a retail price of $98,400. Cullumber paid 5% sales tax on this purchase and hired a contractor to build a “clean” platform enclosure for the machine for $7,350. Cullumber estimates the machine will have a 5-year useful life, with a salvage value of $8,200 at the end of 5 years. Cullumber uses straight-line depreciation and employs the “half-year” convention in accounting for partial-year depreciation. Cullumber’s fiscal year ends on December 31.
At what amount should Cullumber record the acquisition cost of the machine?
| Acquisition cost of the machine | $enter The Acquisition cost of the machine in dollars |
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