urchased a parcel of land as a factory site (unusable) for P320,000. An old building on the property was demolished and construction begun on a new warehouse that was completed April 15, 20X2. Costs incurred on the construction project are listed below. Demolition of old building - P 21,000; Architect's fees - 31,700; Legal fees--title investigation - 4,100; Construction costs - 950,000; Imputed interest based on stock financing - 14,000; Landfill for building site - 19,300; Clearing of trees from building site - 9,600; Temporary buildings used for construction activities - 29,000; Land survey - 4,000; Excavation for basement - 13,200; Salvage materials from demolition sold for - P1,8
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.
2. On February 1, 20X1, ABC Corporation purchased a parcel of land as a factory site (unusable) for P320,000. An old building on the property was demolished and construction begun on a new warehouse that was completed April 15, 20X2. Costs incurred on the construction project are listed below. Demolition of old building - P 21,000; Architect's fees - 31,700; Legal fees--title investigation - 4,100; Construction costs - 950,000; Imputed interest based on stock financing - 14,000; Landfill for building site - 19,300; Clearing of trees from building site - 9,600; Temporary buildings used for construction activities - 29,000; Land survey - 4,000; Excavation for basement - 13,200; Salvage materials from demolition sold for - P1,800; Timber sold for P3,300. Determine the cost of the building
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