ia Company’s liabilities are $65,000 and its equity is $45,000. On January 3, Lumia purchases and installs solar panel assets costing $15,000. For the panels, Lumia pays $6,500 cash and promises to pay the remaining $8,500 in six months. What is the total of Lumia’s assets after the solar panel purchase? answer is 118,500
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.
On January 1, Lumia Company’s liabilities are $65,000 and its equity is $45,000. On January 3, Lumia purchases and installs solar panel assets costing $15,000. For the panels, Lumia pays $6,500 cash and promises to pay the remaining $8,500 in six months. What is the total of Lumia’s assets after the solar panel purchase?
answer is 118,500
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