On January 1, 2019, Ciara Corporation acquired an equipment to be used in its manufacturing operations. The equipment has an estimated useful life of 10 years and an estimated residual value of P50,000. The depreciation applicable to this equipment was P240,000 for the year 2021 computed under the sum of years’ digits method. What was the acquisition cost of the equipment
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 January 1, 2019, Ciara Corporation acquired an equipment to be used in its manufacturing operations. The equipment has an estimated useful life of 10 years and an estimated residual value of P50,000. The
- 1,650,000
- 1,700,000
- 2,400,000
- 2,450,000
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