Phoenix Co. acquired a large piece of specialized machinery used in its manufacturing process. The following costs were incurred in connection with the aquisition: Finder's fee $2,000 List price $230,000 Transportation fee $4,000 Speeding ticket during transportation $65 Installation fee $2,500 Cost to repair a door damaged during installation $1,200 Required: Which of the costs incurred by Phoenix Co. should be capitalized to the machinery account?
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.
Phoenix Co. acquired a large piece of specialized machinery used in its manufacturing process. The following costs were incurred in connection with the aquisition:
Finder's fee $2,000
List price $230,000
Transportation fee $4,000
Speeding ticket during transportation $65
Installation fee $2,500
Cost to repair a door damaged during installation $1,200
Required:
Which of the costs incurred by Phoenix Co. should be capitalized to the machinery account?
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