A store building was constructed on January 2, 2009 with a cost of P570,000. Its estimated useful life is 16 years with scrap value of P70,000 after 16 years. In January, 2014 replacement of some worn-out parts of the building costing P50,000 was spent. After the repairs, the building was appraised with a fair market value of P770,000. The allowable deduction for depreciation for the year 2014 is:
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.
A store building was constructed on January 2, 2009 with a cost of P570,000. Its estimated useful life is 16 years with scrap value of P70,000 after 16 years. In January, 2014 replacement of some worn-out parts of the building costing P50,000 was spent. After the repairs, the building was appraised with a fair market value of P770,000. The allowable deduction for
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