Majestic LLC purchased a factory for lump-sum of RO800,000 paid via bank. The fair value of each of component of the purchase is given below: Asset Fair Market value Land 85000 Building 155000 Equipment 460000 Calculate the amount at which each of the above components shall be recognized on purchase date and write the journal entry for recording purchase transaction. a. Dr Land Ac OMR 85000 Dr Building A/C 155000 Dr Equipment A/C 460000and Cr Cash A/C OMR 700000 b. Dr Land Ac OMR 97120 Dr Building A/C 177120 Dr Equipment A/C 525760 and Cr Cash A/C OMR 800000 c. None of the given options d. Dr Cash A/C OMR 800000 and Cr land A/c 97120 Cr Building A/C 177120 Equipment A/C 460000
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.
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Majestic LLC purchased a factory for lump-sum of RO800,000 paid via bank. The fair value of each of component of the purchase is given below:
|
Asset |
Fair Market value |
|
Land |
85000 |
|
Building |
155000 |
|
Equipment |
460000 |
Calculate the amount at which each of the above components shall be recognized on purchase date and write the
Dr Land Ac OMR 85000 Dr Building A/C 155000 Dr Equipment A/C 460000and Cr Cash A/C OMR 700000
Dr Land Ac OMR 97120 Dr Building A/C 177120 Dr Equipment A/C 525760 and Cr Cash A/C OMR 800000
None of the given options
Dr Cash A/C OMR 800000 and Cr land A/c 97120 Cr Building A/C 177120 Equipment A/C 460000
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