Schwartzkopf Co. purchased for $2,200,000 propertythat included both land and a building to be used inoperations. The seller’s book value was $300,000 for theland and $900,000 for the building. By appraisal, the fairvalue was estimated to be $500,000 for the land and$2,000,000 for the building. At what amount shouldSchwartzkopf report the land and the building at theend of the year?
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.
Schwartzkopf Co. purchased for $2,200,000 property
that included both land and a building to be used in
operations. The seller’s book value was $300,000 for the
land and $900,000 for the building. By appraisal, the fair
value was estimated to be $500,000 for the land and
$2,000,000 for the building. At what amount should
Schwartzkopf report the land and the building at the
end of the year?
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