2. On January 1, 2017, Erik Corporation acquired a machine at a cost of P200.00n It was to be depreciated on the straight-line method over a five-year period with no residual value. Because of a bookkeeping error, no depreciation was recorded in Erik's 2017 financial statements. The oversight was discovered during the preparation of Erik's 2018 financial statements. Depreciation expense on this machine in 2018 should be А. РО.00 B. P40,000. С. Р50,000 D. P80,000
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.
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