the total cost of equipment.
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.
Glassworks Co. acquired equipment for 896,000 inclusive of 96,000 refundable purchase tax. A cash discount of 24,000 was available but Glassworks deferred the payment until the end of the credit term. Glassworks incurred freight and installation costs of 40,000. Three weeks after he equipment was installed and used in Glassworks'main office, Glassworks relocated the equipment to one of its branches incurring relocation and reinstallation cost of 50,000.
Requirement: Compute for the total cost of equipment.
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