At November 1, 2021, the following existed in the records of Lauren Company:Plant and equipment P8,600,000Accumulated depreciation 3,970,000During the year ended November 30, 2022, plant with a written down value of P370,000 was sold P490,000. The plant had originally cost P800,000. Plant purchased during the year cost P1,800,000. It is the company’s policy to charge a full year’s depreciation in the year of acquisition of an assets and none in the year of sale, using a rate of 10% on the straight-line basis.What net amount should appear in Lauren’s statement of financial position at November 30, 2022 for plant and equipment?
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.
At November 1, 2021, the following existed in the records of Lauren Company:Plant and equipment P8,600,000Accumulated
Step by step
Solved in 2 steps with 1 images
