On January 1, 2021 the Emming Corporation purchased some machinery. The machinery has an estimated life of 10 years and an estimated residual value of P5, 000. The depreciation on this machinery was P20,000 in 2023. Required Compute the acquisition cost of the equipment under the following depreciation methods: 1. Straight-line 2. Sum-of-the-years’-digits 3. Double-declining-balance
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 the Emming Corporation purchased some machinery. The machinery
has an estimated life of 10 years and an estimated residual value of P5, 000. The
on this machinery was P20,000 in 2023.
Required
Compute the acquisition cost of the equipment under the following depreciation methods:
1. Straight-line
2. Sum-of-the-years’-digits
3. Double-declining-balance
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