factory equipment for $850,000. In addition, it paid $82,000 in sales tax and $7,000 in installation charges. Shipping costs to ship the equipment to the factory were $2,500 and were paid by Lauren. Lauren paid $300,000 in cash and signed a two-year note for the balance. Required: a. Prepare the journal entry to record the acquisition of this equipment. b. Assuming straight-line depreciation, an estimated residual value of $75.000 and an estimated life of
factory equipment for $850,000. In addition, it paid $82,000 in sales tax and $7,000 in installation charges. Shipping costs to ship the equipment to the factory were $2,500 and were paid by Lauren. Lauren paid $300,000 in cash and signed a two-year note for the balance. Required: a. Prepare the journal entry to record the acquisition of this equipment. b. Assuming straight-line depreciation, an estimated residual value of $75.000 and an estimated life of
SWFT Essntl Tax Individ/Bus Entities 2020
23rd Edition
ISBN:9780357391266
Author:Nellen
Publisher:Nellen
Chapter7: Property Transactions: Basis, Gain And Loss, And Nontaxable Exchanges
Section: Chapter Questions
Problem 1BD
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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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