On Big Oil Company's balance sheet at December 31, 2006, the land should be valued at a. $1,400,000 b. $1,350,000 c. $900,000 d. $0
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.
The city of Fairbanks donated land to the Big Oil Company on June 1, 2006, that originally cost the city $900,000. On June 1, 2006, the land was estimated to be worth $1,350,000, and on December 31, 2006, the land's value was estimated to be $1,400,00. On Big Oil Company's
a. $1,400,000
b. $1,350,000
c. $900,000
d. $0
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