On January 1, 20x1, ABC Company acquired a machine with an invoice price of ₱300,000 subject to a cash discount. The terms are 2/10, n/30/ ABC paid freight and insurance during shipment of ₱8,000 and testing and installation cost of ₱12,000. On the same date, ABC also incurred cost of ₱5,000 in removing the old machine prior to the installation of the new one. On January 8, ABC paid the account. Required: Compute for the cost of the machinery.
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, 20x1, ABC Company acquired a machine with an invoice price of ₱300,000 subject to a cash discount. The terms are 2/10, n/30/ ABC paid freight and insurance during shipment of ₱8,000 and testing and installation cost of ₱12,000. On the same date, ABC also incurred cost of ₱5,000 in removing the old machine prior to the installation of the new one. On January 8, ABC paid the account.
Required: Compute for the cost of the machinery.
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