Hummer Company purchased a delivery truck. The total cash payment was $30,000, including the following items. Explain how each of these costs would be accounted for. Negotiated purchase price $24,000 Installation of special shelving 1,100 Painting and lettering 900 Motor vehicle license 180 Annual insurance policy 2,400 Sales 7-2atax 1,420 Total paid $30,000
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.
Hummer Company purchased a delivery truck. The total cash payment was $30,000, including the following items. Explain how each of these costs would be accounted for.
|
Negotiated purchase price |
$24,000 |
|
Installation of special shelving |
1,100 |
|
Painting and lettering |
900 |
|
Motor vehicle license |
180 |
|
Annual insurance policy |
2,400 |
|
Sales 7-2atax |
1,420 |
|
Total paid |
$30,000 |
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