What costs are included in determining the total cost of an asset? Why would a company include more than jyust the purchase price of an asset? Some argue that companies depreciate assets because they lose value. From a financial accounting perspective, is this true? Why or why not?
Homework Answers
First of all, we have to understand the meaning of the total cost of an Asset-The total cost of an asset takes into consideration all the items that can be attributable to its purchase and to putting the asset to use. This cost includes the Purchase price, commissions, transportation exp, installation, testing etc.
so we get our first answer that a company includes more than just the purchase price of an asset.
Now Second which is Companies depreciate assets because they lose value is also true but lose in value due to use,wear and tear or obsolescence.
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