How much should be recorded as the purchase price of the individual PPE items: For items 13 to 17, identify the amount to be included as Building assuming the asset was constructed 13. Ventilating system added – P400,000 14. Excavation cost of land to start construction – P350,000. 15. Built‐in cabinets in the building cafeteria – P 100,000 16. Refrigerator and food trolleys – P300,000 17. After using the asset for two years, additional lighting was installed – P500,000
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.
How much should be recorded as the purchase price of the
individual PPE items:
For items 13 to 17, identify the amount to be included as Building
assuming the asset was constructed
13. Ventilating system added – P400,000
14. Excavation cost of land to start construction – P350,000.
15. Built‐in cabinets in the building cafeteria – P 100,000
16. Refrigerator and food trolleys – P300,000
17. After using the asset for two years, additional lighting was
installed – P500,000
Step by step
Solved in 2 steps
