2. Beauty Company accounted for noncurrent assets using the cost model. Oh November 1, 2021, the entity classified an equipment as held for sale. At that date, the carrying amount of the equipment was P4,000,000, the fair value was estimated at P4,200,000 and the cost of disposal at P300,000. On January 30, 2022, the equipment was sold for a net proceed of P3,600,000.
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.
2. At what amount should the equipment be measured on December 31, 2021?
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