The ML Company imported a new machine at a peso equivalent of $1,320,000. The company has to pay additional cost of importing the asset such as $40,000 import duties and $60,000 non-refundable purchase taxes. Costs of transporting the asset was $20,000 and cost of preparing the asset for its intended use include $12,000 installation and $8,000 testing and trial run costs. How much is the initial cost of the new machine?
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.
The ML Company imported a new machine at a peso equivalent of $1,320,000. The company has to pay additional cost of importing the asset such as $40,000 import duties and $60,000 non-refundable purchase taxes. Costs of transporting the asset was $20,000 and cost of preparing the asset for its intended use include $12,000 installation and $8,000 testing and trial run costs.
How much is the initial cost of the new machine?
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