Major Manufacturing purchased a machine with a contract price of $300,000 and cash terms of 3/10, n/30, on August 28, 2013. The company paid $8,000 in transportation costs and $6,000 for installation. Sales taxes of $21,000 were paid on the invoice amount. The machine should be recorded as a plant asset in the amount of: a. $300,000 b. $321,000 c. $329,000 d. $326,000
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.
Major Manufacturing purchased a machine with a contract price of $300,000 and cash terms of 3/10, n/30, on August 28, 2013. The company paid $8,000 in transportation costs and $6,000 for installation. Sales taxes of $21,000 were paid on the invoice amount. The machine should be recorded as a plant asset in the amount of:
a. $300,000
b. $321,000
c. $329,000
d. $326,000
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