8. On January 1, Step pany with a carrying amount of P2,400,000. The machine was purchased four years earlier for P4,000,000. Step uses the straight-line method of depreciation. During December 20x1, Step determined that the machine suffered permanent impairment of its operational value and will not be economically useful in its production process after December 31, 20x1. Step Co. sold the machine for P650,000, net of disposal cost, on January 5, 20x2. The 20x1 financial statements of Step Co. were authorized for issuance on March 31, 20x2. In its profit or loss for the year ended December 31, 20x1, Step should recognize a loss of
8. On January 1, Step pany with a carrying amount of P2,400,000. The machine was purchased four years earlier for P4,000,000. Step uses the straight-line method of depreciation. During December 20x1, Step determined that the machine suffered permanent impairment of its operational value and will not be economically useful in its production process after December 31, 20x1. Step Co. sold the machine for P650,000, net of disposal cost, on January 5, 20x2. The 20x1 financial statements of Step Co. were authorized for issuance on March 31, 20x2. In its profit or loss for the year ended December 31, 20x1, Step should recognize a loss of
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter22: Accounting For Changes And Errors.
Section: Chapter Questions
Problem 7RE: Bliss Company owns an asset with an estimated life of 15 years and an estimated residual value of...
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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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Transcribed Image Text:8. On January 1, 20x1 Step Company owns a machine with a
carrying amount of P2,400,000. The machine was purchased
four years earlier for P4,000,000. Step uses the straight-line
of depreciation. During December 20x1, Step
determined that the machine suffered permanent impairment
of its operational value and will not be economically useful in
its production process after December 31, 20x1. Step Co. sold
the machine for P650,000, net of disposal cost, on January 5,
20x2. The 20x1 financial statements of Step Co. were
authorized for issuance on March 31, 20x2. In its profit or loss
ended December 31, 20x1, Step should recognize a
method
for the
year
loss of
c. 1,350,000
a. 2,000,000
b. 1,750,000
d. 0
(Adapted)
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