Glenwood Industrial Gear, Inc. incurred the following costs associated with the purchase of a piece of land that it will use to build a retail store: Purchase price of the land $450,000 Cash received from Sale of salvaged parts already on land $20,000 Current year property taxes $3,400 Demolition of the old building $30,000 Ground breaking ceremony (food and supplies) $3,500 Back Property Taxes $14,700 Land preparation and leveling $17,500 What amount should Glenwood Industrial Gear, Inc. capitalize for the land asset? Group of answer choices
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.
Glenwood Industrial Gear, Inc. incurred the following costs associated with the purchase of a piece of land that it will use to build a retail store:
|
Purchase price of the land |
$450,000 |
|
Cash received from Sale of salvaged parts already on land |
$20,000 |
|
Current year property taxes |
$3,400 |
|
Demolition of the old building |
$30,000 |
|
Ground breaking ceremony (food and supplies) |
$3,500 |
|
Back Property Taxes |
$14,700 |
|
Land preparation and leveling |
$17,500 |
What amount should Glenwood Industrial Gear, Inc. capitalize for the land asset?
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