An equipment of KAY Corporation was tested for impairment on December 31, 2019. The carrying value of the said equipment on that date is ₱4,800,000. The equipment can be sold for ₱4,500,000, and an estimate of ₱200,000 will be incurred for disposal. The cash flows that will be generated by the equipment for 2020, 2021, and 2022, are ₱2,000,000; ₱1,800,000; and ₱1,450,000, respectively. The appropriate discount rate is 11%. How much is the impairment loss? A. ₱ 300,000 B. ₱ 0 C. ₱ 500,000 D. ₱ 477,080
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.
An equipment of KAY Corporation was tested for impairment on December 31, 2019. The carrying value of the said equipment on that date is ₱4,800,000. The equipment can be sold for ₱4,500,000, and an estimate of ₱200,000 will be incurred for disposal. The
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