On April 1, 2014, Brandy Company has a machine with a cost of P1,000,000 and accumulated depreciation of P750,000. On April 1, 2014, the entity classified the machine as held for sale and decided to sell the machine within 1 year. On April 1,2014, the machine had an estimated selling price of P100,000 and a remaining useful life of 2 years. It is estimated that selling cost associated with the disposal of the machine will be P10,000. On December 31, 2014, the estimated selling price of the machine had increased to P150,000 with estimated selling cost of P20,000. What amount should be recognized as gain on reversal of impairment on December 31, 2014?
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 April 1, 2014, Brandy Company has a machine with a cost of P1,000,000 and
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