ece of machinery has marked price of P550,000. It was purchased under the term 15%, 10%, and 5% discounts. The cost of freight and installation after deducting the P8,000 sales proceeds of the old machinery which was replaced is P12,000. The new machinery shall be recorded at a cost of A. 411,712 B. 405,000 C. 419,712 D. 3
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.
A piece of machinery has marked price of P550,000. It was purchased under the term 15%, 10%, and 5%
discounts. The cost of freight and installation after deducting the P8,000 sales proceeds of the old
machinery which was replaced is P12,000. The new machinery shall be recorded at a cost of
A
.
411,712 B. 405,000 C. 419,712 D. 397,000
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