ABC Company acquired an equipment on January 1, 2020 for P5,000,000. Depreciation is computed using the straight-line method. The estimated useful life of the equipment is five years with no residual value. A specific price index applicable to the equipment was 150 on January 1, 2020 and 225 on December 31, 2020. What is the unrealized holding gain on the equipment to be reported in 2020? A. 1,250,000 B. 1,500,000 C. 2,000,000 D. 2,500,000
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.
ABC Company acquired an equipment on January 1, 2020 for
P5,000,000.
The estimated useful life of the equipment is five years with no residual
value. A specific price index applicable to the equipment was 150 on
January 1, 2020 and 225 on December 31, 2020. What is the unrealized
holding gain on the equipment to be reported in 2020?
A. 1,250,000
B. 1,500,000
C. 2,000,000
D. 2,500,000
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 2 images
1. What amount of
2. Whhat amount of deprecitation should be reported in the current cost income statement for 2021?
3. What amount should be reported as realized holding gain on the equipment for 2021?
by Bartleby Expert
