Ray Company purchased for 4 500 000 a tract of land as factory site. An existing building on the property was razed to pave the way for the construction of a new factory building. Cost of razing old building 300 000 Title insurance and legal fees to purchase land 200 000 Architect fee 950 000 New building construction cost 8 000 000 1. What is the cost of the land? 2. What is the cost of factory building?
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.
Ray Company purchased for 4 500 000 a tract of land as factory site. An existing building on the property was razed to pave the way for the construction of a new factory building.
Cost of razing old building 300 000
Title insurance and legal fees to purchase land 200 000
Architect fee 950 000
New building construction cost 8 000 000
1. What is the cost of the land?
2. What is the
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