Explain how you would decide whether to record each of the following expenditures as an asset or an expense.Assume all items are material.(a) Legal fees paid in connection with the purchase of land are $1,500.(b) Eduardo, Inc. paves the driveway leading to the office building at a cost of $21,000.(c) A meat market purchases a meat-grinding machine at a cost of $3,500.(d) On June 30, Monroe and Meno, medical doctors, pay 6 months’ office rent to cover the month of July and the next5 months.(e) Smith’s Hardware Company pays $9,000 in wages to laborers for construction on a building to be used in the business.(f) Alvarez’s Florists pays wages of $2,100 for the month to an employee who serves as driver of their delivery truck.
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.
Explain how you would decide whether to record each of the following expenditures as an asset or an expense.
Assume all items are material.
(a) Legal fees paid in connection with the purchase of land are $1,500.
(b) Eduardo, Inc. paves the driveway leading to the office building at a cost of $21,000.
(c) A meat market purchases a meat-grinding machine at a cost of $3,500.
(d) On June 30, Monroe and Meno, medical doctors, pay 6 months’ office rent to cover the month of July and the next
5 months.
(e) Smith’s Hardware Company pays $9,000 in wages to laborers for construction on a building to be used in the business.
(f) Alvarez’s Florists pays wages of $2,100 for the month to an employee who serves as driver of their delivery truck.
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