Joy Corporation decided to dispose of an item of plant that is carried in its records at a cost of P450,000, with accumulated depreciation of P80,000. Depreciation on the plant since it was originally acquired has been charged at P5,000 per month. The plant will continue to be operated until it is sold, at which time the operations of the plant will be outsourced. The company undertook all the necessary actions to be able to classify the asset as held for sale. It is estimated that it could sell the plant for its fair value, P350,000, incurring P10,000 selling costs in the process. The plant has been depreciated at an amount of P5,000 per month. On December 31, 2016, the plant had not been sold but, due
Joy Corporation decided to dispose of an item of plant that is carried in its records at a cost of P450,000, with accumulated depreciation of P80,000. Depreciation on the plant since it was originally acquired has been charged at P5,000 per month. The plant will continue to be operated until it is sold, at which time the operations of the plant will be outsourced. The company undertook all the necessary actions to be able to classify the asset as held for sale. It is estimated that it could sell the plant for its fair value, P350,000, incurring P10,000 selling costs in the process. The plant has been depreciated at an amount of P5,000 per month. On December 31, 2016, the plant had not been sold but, due
Chapter1: Financial Statements And Business Decisions
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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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Joy Corporation decided to dispose of an item of plant that is carried in its records at a cost of P450,000, with accumulated depreciation of P80,000. Depreciation on the plant since it was originally acquired has been charged at P5,000 per month. The plant will continue to be operated until it is sold, at which time the operations of the plant will be outsourced. The company undertook all the necessary actions to be able to classify the asset as held for sale. It is estimated that it could sell the plant for its fair value, P350,000, incurring P10,000 selling costs in the process. The plant has been depreciated at an amount of P5,000 per month.
On December 31, 2016, the plant had not been sold but, due to a shortage of this type of plant, there had been an increase in the fair value to P360,000 while expected costs to sell remain at P10,000.
If Joy Corporation sold the plant on March 1, 2017 for a net proceeds of P351,000, what amount should be included as gain on disposal in the entity's statement of comprehensive income for the year ended 31 December 2017?
If Joy Corporation sold the plant on March 1, 2017 for a net proceeds of P351,000, what amount should be included as gain on disposal in the entity's statement of comprehensive income for the year ended 31 December 2017?
P19,000
P12,000
P11,000
P 1,000
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