anet Company purchased a machine on April 1, 2017 for P750,000. At that time, was determined that the machine had a estimated useful life of 10 years and an estimated residual value of P30,000. The company used the double-declining balance method of depreciation and it is the company's policy to provide full year depreciation in the year of acquisition and no depreciation in the year of disposal. During 2021, after appropriate justification, the company changed its depreciation method to straight-line, at which time the machine's remaining useful life was estimated to be four years (including the current year) without residual value. How much is the depreciation expense for the machine for the year 2021? a. 61,440 b. 72,000 c. 76,800 d. 96,000

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A:

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.