A corporation needs to raise money and sells an issue of 4%, 20-year nonds worth $1,000,000 to an investment company for $970,000. An initial cost of $50,000 is incurred for legal fees, and accounting fees will run $10,000 annually. What is the cost of money to the corporation?
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.
A corporation needs to raise money and sells an issue of 4%, 20-year nonds worth $1,000,000 to an investment company for $970,000. An initial cost of $50,000 is incurred for legal fees, and accounting fees will run $10,000 annually. What is the cost of money to the corporation?
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