On January 1, 2017, NBM Corporation acquired machinery at a cost of ₱500,000. BMB adopted the double-declining balance method of depreciation for this machinery and had been recording depreciation over an estimated useful life of ten years, with no residual value. At the beginning of 2020, a decision was made to change to the straight-line method of depreciation for the machinery. The depreciation expense for 2020 would be ₱25,600 ₱50,000 ₱36,572
On January 1, 2017, NBM Corporation acquired machinery at a cost of ₱500,000. BMB adopted the double-declining balance method of depreciation for this machinery and had been recording depreciation over an estimated useful life of ten years, with no residual value. At the beginning of 2020, a decision was made to change to the straight-line method of depreciation for the machinery. The depreciation expense for 2020 would be ₱25,600 ₱50,000 ₱36,572
Chapter1: Financial Statements And Business Decisions
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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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- On January 1, 2017, NBM Corporation acquired machinery at a cost of ₱500,000. BMB adopted the double-declining balance method of
depreciation for this machinery and had been recording depreciation over an estimated useful life of ten years, with no residual value. At the beginning of 2020, a decision was made to change to the straight-line method of depreciation for the machinery. The depreciation expense for 2020 would be- ₱25,600 ₱50,000
- ₱36,572 ₱71,428
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