the company paid $500,000 to purchase the following: a building with an appraised valued of $200,000 an operating permit valued at $100,000 and ongoing reaserch and development projects valued at $150,00. In addition, it is estimated that the fair value of the order backlog associated with the products manufactured in the building is $100,000; this order backlog is includes as part of the purchase. make the journal entry necessary to revord this cash purchase.
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.
the company paid $500,000 to purchase the following:
a building with an appraised valued of $200,000
an operating permit valued at $100,000 and
ongoing reaserch and development projects valued at $150,00. In addition, it is estimated that the fair value of the order backlog associated with the products manufactured in the building is $100,000; this order backlog is includes as part of the purchase. make the
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