On December 31, 2019, WITT Inc. has a building which has a cost of P42,000,000 and carrying amount of P32,000,000. The building has a residual value of P2,000,000 and being depreciated using straight line method from its acquisition date on January 1, 2015. On January 1, 2020, WITT Inc. revised the useful life of the building by deducting 5 years from the original life and changed the salvage value to P7,000,000. What is the depreciation expense of the building for the year ended December 31, 2020? P2,000,000 P5,000,000 P1,666,667 P2,500,000
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 December 31, 2019, WITT Inc. has a building which has a cost of P42,000,000 and carrying amount of P32,000,000. The building has a residual value of P2,000,000 and being
- P2,000,000
- P5,000,000
- P1,666,667
- P2,500,000
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