Prepare the following journal entries. (a) The $3,700 cost of repairing a vehicle. The repair is not expected to increase the operating efficiency of the vehicle. (b) The $6,500 cost of a major engine overhaul on an emergency generator. The overhaul is expected to increase the operating efficiency of the generator. (c) The $4,000 closing costs associated with the acquisition of land. (d) A $150 charge for transportation expenses on new e
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.
Prepare the following
(a) The $3,700 cost of repairing a vehicle. The repair is not expected to increase the operating efficiency of the vehicle.
(b) The $6,500 cost of a major engine overhaul on an emergency generator. The overhaul is expected to increase the operating efficiency of the generator.
(c) The $4,000 closing costs associated with the acquisition of land.
(d) A $150 charge for transportation expenses on new equipment purchased.
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