On-Time Delivery Company acquired an adjacent lot to construct a new warehouse, paying $27,000 in cash and giving a short-term note for $256,000. Legal fees paid were $2,200, delinquent taxes assumed were $9,800, and fees paid to remove an old building from the land were $20,700. Materials salvaged from the demolition of the building were sold for $4,200. A contractor was paid $860,300 to construct a new warehouse. Determine the cost of the land to be reported on the balance sheet.
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.
Determining Cost of Land
On-Time Delivery Company acquired an adjacent lot to construct a new warehouse, paying $27,000 in cash and giving a short-term note for $256,000. Legal fees paid were $2,200, delinquent taxes assumed were $9,800, and fees paid to remove an old building from the land were $20,700. Materials salvaged from the demolition of the building were sold for $4,200. A contractor was paid $860,300 to construct a new warehouse.
Determine the cost of the land to be reported on the
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