Ayer Industries, Inc., purchased land, paying $95,000 cash as a down payment and signing a $170,000 note payable for the balance. In addition, Ayer Industries, Inc paid delinquent property tax of $2,200, title insurance costing $5,000, and a $5,600 charge for leveling the land and removing an unwanted building. The company constructed an office building on the land at a cost of $800,000. It also paid $54,000 for a fence around the property, $6,000 for the company sign near the entrance, and $8,000 for special lighting of the grounds. Read the requirements.
Ayer Industries, Inc., purchased land, paying $95,000 cash as a down payment and signing a $170,000 note payable for the balance. In addition, Ayer Industries, Inc paid delinquent property tax of $2,200, title insurance costing $5,000, and a $5,600 charge for leveling the land and removing an unwanted building. The company constructed an office building on the land at a cost of $800,000. It also paid $54,000 for a fence around the property, $6,000 for the company sign near the entrance, and $8,000 for special lighting of the grounds. Read the requirements.
Chapter9: Acquisitions Of Property
Section: Chapter Questions
Problem 42P
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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.
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