aithful Company purchased an equipment on January 2, 2021 for P3,000,000. The equipment had an estimated useful life of 5 years. It is the company’s policy to use the double declining method in its first two years and then switch to the straight-line method for the remaining useful life of the asset.
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.
Faithful Company purchased an equipment on January 2, 2021 for P3,000,000. The equipment had an estimated useful life of 5 years. It is the company’s policy to use the double declining method in its first two years and then switch to the straight-line method for the remaining useful life of the asset.
How much is the balance of the
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