A new machine was acquired on May 31, 2022 with the following considerations: Carrying value of old machine given up with current fair value of P500,000 P450,000 Notes payable in two equal annual installment every May 31, starting 2023 400,000 (10%,interest bearing; 2 years; effective rate on this date 9%) Estimated dismantling after eight (8) year life of the machine (at 9% effective 60,000 rate) The machine is depreciated using double declining balance method and estimated to have P80,000 of residual value. How much is the depreciation of the machine in 2022?
A new machine was acquired on May 31, 2022 with the following considerations: Carrying value of old machine given up with current fair value of P500,000 P450,000 Notes payable in two equal annual installment every May 31, starting 2023 400,000 (10%,interest bearing; 2 years; effective rate on this date 9%) Estimated dismantling after eight (8) year life of the machine (at 9% effective 60,000 rate) The machine is depreciated using double declining balance method and estimated to have P80,000 of residual value. How much is the depreciation of the machine in 2022?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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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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