On January 5, 2020, ABC Co. exchanged 8,000 shares of its P25 par value ordinary shares for a parcel of land to be held for a future plant site. The ordinary shares had fair market value of P80 per share on that date. ABC Co. received P36,000 from the sale of scrap when an existing building on the site was razed. The land should be carried at?

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A:

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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.