ABC Company, whose fiscal year ends on December 31, 20x1, purchased a unit of equipment for a total cost of ₱5,000,000. The equipment is expected to have a 5-year useful life and a residual value of 10% of its original cost. 1. Using the straight-line method, how much is the carrying value of equipment as of December 31, 20x4? 2. How much is the Accumulated Depreciation as of December 31, 20x4 using SYD method? 3. Applying the SYD, how much is the carrying value of the equipment as of December 31, 20x3?
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, whose fiscal year ends on December 31, 20x1, purchased a unit of equipment for a total cost of ₱5,000,000. The equipment is expected to have a 5-year useful life and a residual value of 10% of its
original cost.
1. Using the straight-line method, how much is the carrying value of equipment as of December 31, 20x4?
2. How much is the
3. Applying the SYD, how much is the carrying value of the equipment as of December 31, 20x3?
4. If double declining balance is applied, how much is the depreciation expense on 20x3?
5. Assume the company chose to switch its depreciation method from straight line to double declining
balance on January 1, 20x2, how much is the depreciation expense for 20x4?
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