3. ABC Company owns a machine that was bought on January 2, 20X8, for P376,000. The machine was estimated to have a useful life of five years and a salvage value of P24,000. ABC uses the sum-of-the-years'-digits method of depreciation. At the beginning of 2021, ABC determined that the useful life of the machine should have been four years and the salvage value P35,200. For the year 2021, ABC should record the depreciation expense on this machine of?
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.
3. ABC Company owns a machine that was bought on January 2, 20X8, for P376,000. The machine was estimated to have a useful life of five years and a salvage value of P24,000. ABC uses the sum-of-the-years'-digits method of
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