On January 1, 2020 Machu, Inc. acquired mining rights near Cordillera for P20,000,000 for 10 years, there was no cash payment, instead Mach issued a 2-year non-interest bearing note. Since the Company's inception in 1956, the Company continued to restore the lands affected by its mining activities. Management Expects restoration costs to be P2,000,000. Discount rates for similar instruments are as follows: 8% for 2 years and 12% for 10 years. On December 21, 2020, Machu was being sued by one of another corporation over a patent infringement. The Company's legal counsel finds it probable that Machu will be liable for P2,000,000 damages. Machu has a P5,000,000 comprehensive insurance which covers these type of situations. The insurance has a P300,000 deductible clause How much is the total provisions taken to the statement of comprehensive income as of December 31, 2020 (round off your answers to the nearest whole number)?
On January 1, 2020 Machu, Inc. acquired mining rights near Cordillera for P20,000,000 for 10 years, there was no cash payment, instead Mach issued a 2-year non-interest bearing note. Since the Company's inception in 1956, the Company continued to restore the lands affected by its mining activities. Management Expects restoration costs to be P2,000,000. Discount rates for similar instruments are as follows: 8% for 2 years and 12% for 10 years. On December 21, 2020, Machu was being sued by one of another corporation over a patent infringement. The Company's legal counsel finds it probable that Machu will be liable for P2,000,000 damages. Machu has a P5,000,000 comprehensive insurance which covers these type of situations. The insurance has a P300,000 deductible clause How much is the total provisions taken to the statement of comprehensive income as of December 31, 2020 (round off your answers to the nearest whole number)?
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, 2020 Machu, Inc. acquired mining rights near Cordillera for P20,000,000 for 10
years, there was no cash payment, instead Mach issued a 2-year non-interest bearing note.
Since the Company's inception in 1956, the Company continued to restore the lands affected
by its mining activities. Management Expects restoration costs to be P2,000,000. Discount
rates for similar instruments are as follows: 8% for 2 years and 12% for 10 years.
On December 21, 2020, Machu was being sued by one of another corporation over a patent
infringement. The Company's legal counsel finds it probable that Machu will be liable for
P2,000,000 damages.
Machu has a P5,000,000 comprehensive insurance which covers these type of situations. The
insurance has a P300,000 deductible clause
How much is the total provisions taken to the statement of comprehensive income as of
December 31, 2020 (round off your answers to the nearest whole number)?
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