Cleveland Ltd acquired real estate for the construction of a building and other facilities. Operating equipment was also purchased and installed. The company's accountant, who was not sure how to record some of the transactions, opened a Property ledger account and recorded debits and (credits) to this account as follows.
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.
Cleveland Ltd acquired real estate for the construction of a building and other facilities. Operating equipment was also purchased and installed. The company's accountant, who was not sure how to record some of the transactions, opened a Property ledger account and recorded debits and (credits) to this account as follows.
|
Cost of land purchased as a building site |
P170,000 |
|
Architect's fee for design of new building |
23,000 |
|
Paid for the demolition of an old building on the building site purchased above |
28,000 |
|
Paid land tax on the real estate purchased as a building site |
1,700 |
|
Paid excavation costs for the new building |
15,000 |
|
Made the first payment to the building contractor |
250,000 |
|
Paid for equipment to be installed in the new building |
148,000 |
|
Received from sale of salvaged materials from demolishing the old building |
(6,800) |
|
Made final payment to the building contractor |
350,000 |
|
Paid interest on building loan during construction |
22,000 |
|
Paid freight on equipment purchased |
1,900 |
|
Paid installation costs of equipment |
4,200 |
|
Paid for repair of equipment damaged during installation |
2,700 |
|
Property ledger account balance |
P1,009,700 |
Compute for Land.
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