March 1, 2021, Bharat Corporation purchased an equipment for P500,000 with an estimated residual value of P50,000 at the end of its five-year useful life. Bharat Corporation uses the straight-line method of depreciation. The equipment was immediately leased to Covaxin Company for two years at a monthly rental of P18,000 payable at the beginning of the month starting on March 1, 2021. On this date, Covaxin Company paid Bharat Corporation a lease bonus of P12,000. During the year 2021, Bharat incurred insurance and maintenance costs for the equipment of P8,000 and P2,000, respectively. How much is Bharat Corporation’s net revenue from this lease for the year ended December 31, 2021?
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.
On March 1, 2021, Bharat Corporation purchased an equipment for P500,000 with an estimated residual value of P50,000 at the end of its five-year useful life. Bharat Corporation uses the straight-line method of
The equipment was immediately leased to Covaxin Company for two years at a monthly rental of P18,000 payable at the beginning of the month starting on March 1, 2021. On this date, Covaxin Company paid Bharat Corporation a lease bonus of P12,000.
During the year 2021, Bharat incurred insurance and maintenance costs for the equipment of P8,000 and P2,000, respectively.
How much is Bharat Corporation’s net revenue from this lease for the year ended December 31, 2021?
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