.DEPLORABLE BAD Co. acquired a machine on October 5, 20x1 for a total cost of P160,000. The machine was estimated to have a useful life of 4 years and a salvage value of P10,000. DEPLORABLE BAD Co. uses the sum-of-the-years' digits method and prorates full-year depreciation to the nearest month. DEPLORABLE BAD Co. sold the machine on December 27, 20x2 for $40,000. How much is the gain (loss) on the sale? a. (48,750) b. 48,750 c. (32,250) d. 32,250
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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On January 1, 20x1, ABASE Co. purchased 20,000 out of the 100,000 total outstanding shares of PRAISE, Inc. for ₱4,000,000. PRAISE's assets and liabilities approximate their fair values. In 20x1, PRAISE, Inc. reported profit of ₱12,000,000 and declared and paid cash dividends of ₱800,000. In 20x2, PRAISE reported loss of ₱8,000,000, declared and issued 10% stock dividends, and reported gain on property revaluation of ₱2,000,000 and loss on exchange differences on translation of foreign operations of ₱400,000.
How much are the amounts reported in ABASE Co.'s 20x1 (1) statement of profit or loss and (2)
by Bartleby ExpertDEPLORABLE BAD Co. acquired a machine on October 5, 20x1 for a total cost of ₱160,000. The machine was estimated to have a useful life of 4 years and a salvage value of ₱10,000. DEPLORABLE BAD Co. uses the sum-of-the-years' digits method and prorates full-year
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