JOOVI Inc. has recently purchased and installed a new machine for its manufacturingplant. Th e company incurred the following costs:Purchase price $12,980Freight and insurance $1,200Installation $700Testing $100Maintenance staff training costs $500Th e total cost of the machine to be shown on JOOVI’s balance sheet is closest to:A. $14,180.B. $14,980.C. $15,480.
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.
JOOVI Inc. has recently purchased and installed a new machine for its manufacturing
plant. Th e company incurred the following costs:
Purchase price $12,980
Freight and insurance $1,200
Installation $700
Testing $100
Maintenance staff training costs $500
Th e total cost of the machine to be shown on JOOVI’s
A. $14,180.
B. $14,980.
C. $15,480.
Step by step
Solved in 2 steps
