Problem 4: Ocean Company recently acquired several items of property, plant and equipment. The transactions are as follows: Purchases a building for P1, 000, 000 in cash and 50, 000 shares of Ocean company with P100 par value which sold for P120 on transaction date Received a parcel of land located in Davao City from a philanthropist as an inducement to locate a plant in the city. The land has a fair value of P1, 500, 000. Acquired a machinery for cash. The machinery was priced at P800, 000 and a 5% cash discount is allowed Acquired an equipment for P200, 000 by issuing a 60-day, 12% note. Required: Determine the cost of the ff: Building_____________________ Land______________________ Machinery_________________ Equipment_____________________
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.
Problem 4:
Ocean Company recently acquired several items of property, plant and equipment. The transactions are as follows:
- Purchases a building for P1, 000, 000 in cash and 50, 000 shares of Ocean company with P100 par value which sold for P120 on transaction date
- Received a parcel of land located in Davao City from a philanthropist as an inducement to locate a plant in the city. The land has a fair value of P1, 500, 000.
- Acquired a machinery for cash. The machinery was priced at P800, 000 and a 5% cash discount is allowed
- Acquired an equipment for P200, 000 by issuing a 60-day, 12% note.
Required:
Determine the cost of the ff:
Building_____________________
Land______________________
Machinery_________________
Equipment_____________________
What is the rule in solving the problem?
Step by step
Solved in 2 steps
