Maya-Maya Company had the following transactions during 2020: a. On January 1, Vilma company recorded a loss resulting from a change in inventory valuation method of P80,000. b. The company had estimated that total depreciation expense for the year ended December 31, 2020 will amount to P400,000. As of the beginning of the year, the company had fixed assets amounting to P1,000,000 and acquired additional fixed assets of P2,000,000 on June 30, 2020. The estimated useful life is for 5 years. c. The 2020 year-end bonuses to employees will total P600,000. d. The company had also a 180-day note receivable dated February 28, 202o, amounting to P3,000,000 and carries a 12% interest rate. It was discounted without recourse on the same day for a net proceed of P2,985,000.
Maya-Maya Company had the following transactions during 2020: a. On January 1, Vilma company recorded a loss resulting from a change in inventory valuation method of P80,000. b. The company had estimated that total depreciation expense for the year ended December 31, 2020 will amount to P400,000. As of the beginning of the year, the company had fixed assets amounting to P1,000,000 and acquired additional fixed assets of P2,000,000 on June 30, 2020. The estimated useful life is for 5 years. c. The 2020 year-end bonuses to employees will total P600,000. d. The company had also a 180-day note receivable dated February 28, 202o, amounting to P3,000,000 and carries a 12% interest rate. It was discounted without recourse on the same day for a net proceed of P2,985,000.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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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In the company’s interim income statement for the six months ended June 30, 2020, what total amount of expense relating to these items should be reported?
Transcribed Image Text:Maya-Maya Company had the following transactions during 2020:
a. On January 1, Vilma company recorded a loss resulting from a change in inventory
valuation method of P80,000.
b. The company had estimated that total depreciation expense for the year ended
December 31, 2020 will amount to P400,000. As of the beginning of the year, the
company had fixed assets amounting to P1,000,000 and acquired additional fixed
assets of P2,000,000 on June 30, 2020. The estimated useful life is for 5 years.
c. The 2020 year-end bonuses to employees will total P600,000.
d. The company had also a 180-day note receivable dated February 28, 2020,
amounting to P3,000,000 and carries a 12% interest rate. It was discounted without
recourse on the same day for a net proceed of P2,985,000.
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