Chuck Company operates an oil platform at the Pacific Ocean. An oil platform was built by the Company at a cost of P25,000,0000 on January 1, 2011, the present value of expected restoration costs at that time was P5,000,000. The oil platform has an estimated useful life of 20 years, with no residual value. On December 31, 2020, the Company was offered P18,000,000 to sell the platform. The selling costs would be P2,500,0000. The value in use of the platform is P13,000,000. How much is the impairment loss for the year 2020? Group of answer choices 2,500,000 500,000 None 2,000,000
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.
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Chuck Company operates an oil platform at the Pacific Ocean. An oil platform was built by the Company at a cost of P25,000,0000 on January 1, 2011, the present value of expected restoration costs at that time was P5,000,000. The oil platform has an estimated useful life of 20 years, with no residual value.
On December 31, 2020, the Company was offered P18,000,000 to sell the platform. The selling costs would be P2,500,0000. The value in use of the platform is P13,000,000.
How much is the impairment loss for the year 2020?
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