Martini Company incurred the following costs in purchasing a land as a factory site: Purchase price 2,400,000 Cost of tearing down old building 240,000 Legal fee for title investigation 15,000 Title insurance 10,000 Architect fee 125,000 Liability insurance during construction 25,000 Excavation cost 40,000 Payment to building contractor 8,800,000 Special assessment by city for public improvement 30,000 Interest cost during construction 300,000 What is the cost of the building?
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.
Martini Company incurred the following costs in purchasing a land as a factory site:
Purchase price 2,400,000
Cost of tearing down old building 240,000
Legal fee for title investigation 15,000
Title insurance 10,000
Architect fee 125,000
Liability insurance during construction 25,000
Excavation cost 40,000
Payment to building contractor 8,800,000
Special assessment by city for public improvement 30,000
Interest cost during construction 300,000
What is the cost of the building?
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