Goliath Company purchased an equipment on January 2, 2017 for P3,000,000. At the date of acquisition, the equipment had a life of 6 years with no salvage value. The equipment is being depreciated on a straightline basis. In January 2020, Goliath Company determined that the equipment had a useful life of 8 years from the date of acquisition with no salvage value. What should be the carrying amount of the equipment as of December 31, 2020? A. P300,000 B. P500,000 C. P1,200,000 D. P1,800,000
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.
Goliath Company purchased an equipment on January 2, 2017 for
P3,000,000. At the date of acquisition, the equipment had a life of 6 years
with no salvage value. The equipment is being
equipment had a useful life of 8 years from the date of acquisition with no
salvage value. What should be the carrying amount of the equipment as of
December 31, 2020?
A. P300,000
B. P500,000
C. P1,200,000
D. P1,800,000
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