Question 6 An equipment was acquired on December 31, 2016 for P5,000,000 and is expected to have a 10-year useful life. The straight-line method was used. On January 1, 2020, the asset was deemed to have a sound value of P4,800,000. On January 1, 2023, the replacement cost of the asset was P3,500,000. How much should be taken to profit or loss for the period ended December 31, 2023?
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.
Question 6
An equipment was acquired on December 31, 2016 for P5,000,000 and is expected to have a 10-year useful life. The straight-line method was used. On January 1, 2020, the asset was deemed to have a sound value of P4,800,000. On January 1, 2023, the replacement cost of the asset was P3,500,000.
How much should be taken to profit or loss for the period ended December 31, 2023?
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