Recognition and Initial Measurement on Property Plant and Equipment 1. Paid cash of P200,000 and issued a note for the purchase of machinery. The note has a face value of P1,000,000 due after three years and an effective interest rate of 7%. 2. Equipment has an invoice price of P1,000,000, and a credit term of 2/30, n/60. Cash discount was not taken. 3. Five units of equipment was purchased through the issuance of 1,000 pieces of P1,000 par-value shares. Each equipment has a fair value of P300,000 while a share is valued
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.
Recognition and Initial Measurement on Property Plant and Equipment
1. Paid cash of P200,000 and issued a note for the purchase of machinery. The note has a face value of P1,000,000 due after three years and an effective interest rate of 7%.
2. Equipment has an invoice price of P1,000,000, and a credit term of 2/30, n/60. Cash discount was not taken.
3. Five units of equipment was purchased through the issuance of 1,000 pieces of P1,000 par-value shares. Each equipment has a fair value of P300,000 while a share is valued at P1400.
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