Suppose you have purchased land, a building, and some equipment. At the time of the acquisition, the land has a current fair value of $75,000, the building’s fair value is $60,000, and the equipment’s fair value is $15,000. Journalize the lump-sum purchase of the three assets for a total cost of $140,000. Assume you sign a note payable for this amount.
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.
1. Suppose you have purchased land, a building, and some equipment. At the time of the acquisition, the land has a current fair value of $75,000, the building’s fair value is $60,000, and the equipment’s fair value is $15,000. Journalize the lump-sum purchase of the three assets for a total cost of $140,000. Assume you sign a note payable for this amount.
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