At Sept. 30, 20X9, Thatcher Inc.'s trial balance showed a brand at cost of 50,000,000 less accumulated amortization brought forward at Oct. 1, 20X8 of P9 million. Amortization is based on a ten-year useful life. An impairment review on Apr. 1, 20X9 concluded that the brand had a value in use of P12 million and a remaining useful life of four years. However, on the same date Thatcher Inc. received an offer to purchase the brand for P30,000. What should be the carrying amount of the brand in the statement of financial position of Thatcher Inc. as at Sept. 30, 20X9?
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 Sept. 30, 20X9, Thatcher Inc.'s
What should be the carrying amount of the brand in the
Step by step
Solved in 3 steps
