On January 1, 2019, Fur Company purchased a machinery at a cost of P goods 21,000,000 with an estimated useful life of 10 years and scrap value of P 1,000,000. The double declining balance method of depreciation is used by the entity. In January 2021, it is estimated that the useful life of the machinery from acquisition date should have been 7 years while the residual value should have been P 960,000. What is the depreciation expense for the year 2021?
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, Fur Company purchased a machinery at a cost of P goods 21,000,000 with an estimated useful life of 10 years and scrap value of P 1,000,000. The double declining balance method of
In January 2021, it is estimated that the useful life of the machinery from acquisition date should have been 7 years while the residual value should have been P 960,000.
What is the depreciation expense for the year 2021?
P 6,384,000
P 2,688,000
P 2,352,000
P 5,376,000
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