Figaro Company acquired land and paid in full by issuing Php600,000 of its 10% Bonds Payable and 40,000 ordinary shares with par value of Php10. The share was selling at Php19 and the bonds were trading at Php102.
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.
- What amount should Figaro record as cost of the land?
- what amount should the machine acquired be recorded?
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