Held for Sale on March 31, 2020. The equipment is being depreciated over 5 years on a straight-line basis and has a remaining life of 3 years as of January 1, 2020. The following additional information is available: Fair value less cost to sell on March 1, 2020, P36,000. Fair value less cost to sell on December 31, 2020, P40,000. Required: Assume instead that the fair value less cost to sell on December 31, 2020 decreased to P35,000. Give the entry on December 31, 2020.
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.
Held for Sale on March 31, 2020. The equipment is being
Fair value less cost to sell on March 1, 2020, P36,000. Fair value less cost to sell on December 31, 2020, P40,000.
Required:
- Assume instead that the fair value less cost to sell on December 31, 2020 decreased to P35,000. Give the entry on December 31, 2020.
Step by step
Solved in 2 steps
