ABC, Inc. purchased a crane on January 1, 2018, for P205,500. At the time of purchase, the crane was estimated to have a life of 6 years and a residual value of P13,500. In 2020, ABC Inc. determined that the crane had a total useful life of 7 years and a residual value of P9,000. If ABC Inc. uses the straight line method of depreciation, what will be the depreciation expense for the crane in 2020?
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.
ABC, Inc. purchased a crane on January 1, 2018, for P205,500. At the time of purchase, the crane was estimated to have a life of 6 years and a residual value of P13,500. In 2020, ABC Inc. determined that the crane had a total useful life of 7 years and a residual value of P9,000. If ABC Inc. uses the
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