On January 1, 2021, Piling Company has Land, Building and Machinery with brought forward balances from the previous year of P325,000, P2,535,000, and P8,450,000 respectively, and total accumulated depreciation using the straight-line method of P4,160,000. Annual depreciation charged to income at each year-end was P650,000. In 2022, Piling purchased an additional machine and retired an old one. The new machine, costing P585,000, increased the annual depreciation by 10%. By December 31, 2022, the accumulated depreciation account has ending balance of P5,200,000. What amount was debited to the accumulated depreciation account upon the retirement of the old machinery?
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.
On January 1, 2021, Piling Company has Land, Building and Machinery with brought forward balances from the previous year of P325,000, P2,535,000, and P8,450,000 respectively, and total
In 2022, Piling purchased an additional machine and retired an old one. The new machine, costing
P585,000, increased the annual depreciation by 10%. By December 31, 2022, the accumulated depreciation account has ending balance of P5,200,000.
What amount was debited to the accumulated depreciation account upon the retirement of the old machinery?
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