On January 1, 2017, an entity purchased a machine for P5,280,000 and depreciated it by the straight line method using an estimated useful life of eight years with no residual value. On January 1, 2020, the entity determined that the machine has a useful life of six years from the date of acquisition with a residual value of P480,000. What is the accumulated depreciation on December 31, 2020? a. 2,920,000 c. 3,200,000 b. 3,080,000 d. 3,520,000
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.
6. On January 1, 2017, an entity purchased a machine for P5,280,000 and
method
determined that the machine has a useful life of six years from the date of acquisition with a residual value of
P480,000. What is the
a. 2,920,000 c. 3,200,000
b. 3,080,000 d. 3,520,000
7. On January 1, 2018 an entity purchased for P4,800,000 machine with useful life of ten years on residual of
P200,000. The machine was depreciated by the double declining balance method. The entity changed to the
straight line method on January 1, 2020 and the residual value did not change. What is the accumulated
depreciation on December 31,2020?
a. 2,087,000 c. 2.188,000
b. 2,112,000 d. 2,015,200
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