Maroon Company’s depreciation policy on machinery and equipment is as follows: A full year’s depreciation is take in the year of an asset’s acquisition No depreciation is take in the year of an asset’s disposition The estimated useful life is five years The straight-line method is used On June 30, 2021, Maroon sold for P230,000 a machine acquired in 2018 for P420,000. The accumulated depreciation was P216,000 at December 31, 2020, and the original estimated salvage value was P60,000. How much was the gain or loss on the disposal should Maroon record in 2021? a. 26,000 loss b. 26,000 gain c. 14,000 gain d. 34,000 loss
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.
Maroon Company’s
- A full year’s depreciation is take in the year of an asset’s acquisition
- No depreciation is take in the year of an asset’s disposition
- The estimated useful life is five years
- The straight-line method is used
On June 30, 2021, Maroon sold for P230,000 a machine acquired in 2018 for P420,000. The accumulated depreciation was P216,000 at December 31, 2020, and the original estimated salvage value was P60,000.
How much was the gain or loss on the disposal should Maroon record in 2021?
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