Good Influence, Inc. obtained a land with an old building, that will be accounted for under property, plant and equipment. The Company intends to demolish the old building, since the old building is already deemed unusable. The following information relates to the land and building: Purchase price of the land and building P3,500,000 Fair value of the land 3,000,000 Historical cost Land 2,000,000 Old building 6,000,000 Demolition costs 700,000 Which of the following statements are true? Group of answer choices The cost of the new building is P17,100,000 million. The amount of expense to be recognized is P700,000. Which is equal to the demolition costs since the old building is already unusable. The demolition costs would be capitalized as part of land. The cost of land is deemed to be P3,000,000.
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.
Good Influence, Inc. obtained a land with an old building, that will be accounted for under property, plant and equipment. The Company intends to demolish the old building, since the old building is already deemed unusable. The following information relates to the land and building:
Purchase price of the land and building P3,500,000
Fair value of the land 3,000,000
Historical cost
Land 2,000,000
Old building 6,000,000
Demolition costs 700,000
Which of the following statements are true?
Group of answer choices
The cost of the new building is P17,100,000 million.
The amount of expense to be recognized is P700,000. Which is equal to the demolition costs since the old building is already unusable.
The demolition costs would be capitalized as part of land.
The cost of land is deemed to be P3,000,000.
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