Mickelson Inc. owns land that it purchased on January 1,2000, for $450,000. At December 31, 2017, its currentvalue is $770,000 as determined by appraisal. At whatamount should Mickelson report this asset on its December31, 2017, balance sheet? Explain.
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.
Mickelson Inc. owns land that it purchased on January 1,
2000, for $450,000. At December 31, 2017, its current
value is $770,000 as determined by appraisal. At what
amount should Mickelson report this asset on its December
31, 2017, balance sheet? Explain.
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