Mabini Company closes its books every December 31. On August 1, 2018, they bought a machine for P300,000. The machine is expected to have a useful life of 10 years with no scrap value. On August 1, 2022, P36,000 was paid for the major overhaul of the machine which extended the life of the machine for another two years. The machine was sold for P185,000 on June 30, 2023. The depreciation expense of the machine for 2022 was: The sale of the machine resulted in a gain/loss of a. 33,250 b. 35,500 c. 39,250 d. 6,250
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.
Mabini Company closes its books every December 31. On August 1, 2018, they bought a machine for P300,000. The machine is expected to have a useful life of 10 years with no scrap value. On August 1, 2022, P36,000 was paid for the major overhaul of the machine which extended the life of the machine for another two years. The machine was sold for P185,000 on June 30, 2023. The
The sale of the machine resulted in a gain/loss of
a. 33,250
b. 35,500
c. 39,250
d. 6,250
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