ABC Inc. purchased a machine on January 1, 2014 for 900,000. This asset will be depreciated for 10 years. The ABC Inc. purchased a replacement part for 180,000 on January 1, 2020. Assuming the replace part’s cost cannot be determined how much is the loss on replacement to be recognized for 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 machine on January 1, 2014 for 900,000. This asset will be
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