BCareful incurred the following expenditures in 2020: Purchase of land P15,600,000 Land survey 208,000 Fees for search of title for land 24,000 Building construction permit fee 140,000 Temporary quarters for construction workers 430,000 Payments to tenants of the old building 184,000 Cost to raze the old building 940,000 Excavation of land 400,000 Special assessment of the government for road projects 80,000 Dividends that should have been earned had the money used for construction been invested in equity instruments 200,000 Damages awarded to injuries sustained in construction where no insurance is carried 336,000 Cost of construction 78,000,000 Cost of paving parking lot, driveway and sidewalks 1,600,000 Profit on construction, as the difference between the appraised value of the asset after construction and actual costs incurred 1,900,000 List price of machinery and equipment purchased 4,567,000 Cash discount not taken on the machinery and equipment purchased 127,000 Cost of freight and handling 50,000 Cost of testing the equipment 125,000 Additional information: A portion of the building site had been temporarily used by University of Iloilo to operate a car park while the building was being constructed. A total of P650,000 was earned by the University from this incidental activity. Proceeds from sale of produce from testing done on the machinery and equipment amounted to P65,000. How much is the cost of land, building and machinery, respectively? P15,832,000; P80,094,000; P4,615,000 P15,912,000; P81,044,000; P4,677,000 P15,912,000; P80,094,000; P4,550,000 P16,312,000; P76,694,000; P4,677,000
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.
BCareful incurred the following expenditures in 2020:
|
Purchase of land |
P15,600,000 |
|
Land survey |
208,000 |
|
Fees for search of title for land |
24,000 |
|
Building construction permit fee |
140,000 |
|
Temporary quarters for construction workers |
430,000 |
|
Payments to tenants of the old building |
184,000 |
|
Cost to raze the old building |
940,000 |
|
Excavation of land |
400,000 |
|
Special assessment of the government for road projects |
80,000 |
|
Dividends that should have been earned had the money used for construction been invested in equity instruments |
200,000 |
|
Damages awarded to injuries sustained in construction where no insurance is carried |
336,000 |
|
Cost of construction |
78,000,000 |
|
Cost of paving parking lot, driveway and sidewalks |
1,600,000 |
|
Profit on construction, as the difference between the appraised value of the asset after construction and actual costs incurred |
1,900,000 |
|
List price of machinery and equipment purchased |
4,567,000 |
|
Cash discount not taken on the machinery and equipment purchased |
127,000 |
|
Cost of freight and handling |
50,000 |
|
Cost of testing the equipment |
125,000 |
Additional information:
- A portion of the building site had been temporarily used by University of Iloilo to operate a car park while the building was being constructed. A total of P650,000 was earned by the University from this incidental activity.
- Proceeds from sale of produce from testing done on the machinery and equipment amounted to P65,000.
How much is the cost of land, building and machinery, respectively?
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