There were existing 30 durian threes that RCSB didn’t cleared out when they bought the agriculture land. The market price of these durian trees obtained from professional valuer was RM2,000 each. The useful life of these trees was estimated to be 5 years. In addition, purchased 50 durian trees sapling in December 2017 as well to be planted at the farm. The trees were purchased for future source of income. Each of the durian tree sapling cost RM200. RCSB also purchased RM5,000 worth of cow grass sapling to be planted at the farm. The cow grass will be used to feed the cattle when the grass matures. Prepare a journal and extract the statement of financial position.
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.
There were existing 30 durian threes that RCSB didn’t cleared out when they bought the agriculture land. The market price of these durian trees obtained from professional valuer was RM2,000 each. The useful life of these trees was estimated to be 5 years. In addition, purchased 50 durian trees sapling in December 2017 as well to be planted at the farm. The trees were purchased for future source of income. Each of the durian tree sapling cost RM200. RCSB also purchased RM5,000 worth of cow grass sapling to be planted at the farm. The cow grass will be used to feed the cattle when the grass matures. Prepare a journal and extract the
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