Mortal Company acquired a machine for P3,200,000 on August 31, 2017. The machine has a 5-year useful life, a P500,000 residual value, and was depreciated using the straight line method. On May 31, 2020, a test for recoverability revealed that the expected net future undiscounted cash inflows related to the continued use and eventual disposal of the machine amount to P1,500,000. The fair value less cost of disposal of the machine on May 31, 2020 is P1,350,000 with no residual value. What is the depreciation of the machine for June 2020?

Mortal Company acquired a machine for P3,200,000 on August 31, 2017. The machine has a 5-year useful life, a P500,000 residual value, and was depreciated using the straight line method. On May 31, 2020, a test for recoverability revealed that the expected net future undiscounted cash inflows related to the continued use and eventual disposal of the machine amount to P1,500,000. The fair value less cost of disposal of the machine on May 31, 2020 is P1,350,000 with no residual value. What is the depreciation of the machine for June 2020?

Name: • Compute the Impairment Loss on May 31, 2020• Compute the Accumulated
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Description: • Compute the Impairment Loss on May 31, 2020• Compute the Accumulated Depreciation on December 31, 2020• Compute the Carrying Amount of Asset on December 31, 2020 Mortal Company acquired a machine for P3,200,000 on August31, 2017.The machine has a 5

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Concept explainers

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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Question

• Compute the Impairment Loss on May 31, 2020 • Compute the Accumulated Depreciation on December 31, 2020 • Compute the Carrying Amount of Asset on December 31, 2020

Mortal Company acquired a machine for P3,200,000 on August
31, 2017.
The machine has a 5-year useful life, a P500,000 residual
value, and was depreciated using the straight line method.
On May 31, 2020, a test for recoverability revealed that the
expected net future undiscounted cash inflows related to
the continued use and eventual disposal of the machine
amount to P1,500,000.
The fair value less cost of disposal of the machine on May
31, 2020 is P1,350,000 with no residual value.
er
What is the depreciation of the machine for June 2020?

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