On January 1, 2019, the Philippine Rabbit Bus Co. purchased 20 buses at a total cost of P100,000,000. The buses have an average useful life of 5 year and the group method of depreciation is applied. The buses are retired as follows: No. of Bus Salvage Proceeds Dec. 31, 2022 5 P 5,000,000 Dec. 31, 2023 15 12,000,000 10. How much is the depreciation for 2019? 11. Give the entry to record retirement of 5 buses on Dec. 31, 2022. 12. How much is the depreciation for 2023? 13. Give the entry to record retirement of 15 buses on Dec. 31, 2023.
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, the Philippine Rabbit Bus Co. purchased 20 buses at a total cost of P100,000,000.
The buses have an average useful life of 5 year and the group method of
are retired as follows:
No. of Bus Salvage Proceeds
Dec. 31, 2022 5 P 5,000,000
Dec. 31, 2023 15 12,000,000
10. How much is the depreciation for 2019?
11. Give the entry to record retirement of 5 buses on Dec. 31, 2022.
12. How much is the depreciation for 2023?
13. Give the entry to record retirement of 15 buses on Dec. 31, 2023.
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