Kuya Company uses hand tools in its manufacturing activities. On January 1, 2018, there are 800 of such tools on hand at a cost of P200 each. Acquisition and retirement in the year 2018 are: Acquisition Retirement Estimated value at year end 400 @ P300 300 @P50 P 200,000 Assuming that retirements are on a first-in, first-out basis, how much is the depreciation using the method below? 13 a. The depreciation using the retirement method is _________________. 14 b. The depreciation using the replacement method is ________________. 15 c. The depreciation using the inventory method is ____________________. 16 d. The retirement method yields the lowest amount of depreciation compared to replacement and inventory methods. Answer the statement letter D as True or False.
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.
Kuya Company uses hand tools in its manufacturing activities. On January 1, 2018, there are 800 of such tools on
hand at a cost of P200 each. Acquisition and retirement in the year 2018 are:
Acquisition Retirement Estimated value at year end
400 @ P300 300 @P50 P 200,000
Assuming that retirements are on a first-in, first-out basis, how much is the
13 a. The depreciation using the retirement method is _________________.
14 b. The depreciation using the replacement method is ________________.
15 c. The depreciation using the inventory method is ____________________.
16 d. The retirement method yields the lowest amount of depreciation compared to replacement and inventory
methods. Answer the statement letter D as True or False.
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