On January 1, 20x1, ABC Co. decided to lease out a building that was previously used as office space. The building has a historical cost of P 5,000,000 and accumulated depreciation of P 4,000,000. 1. ABC Co. uses the cost model for both of its investment property and PPE. The building has a fair value of P 1,400,000 on January 1, 20x1. The journal entries revealed a credit to Building at _________on January 1, 20x1.
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, 20x1, ABC Co. decided to lease out a building that was previously used as office space. The building has a historical cost of P 5,000,000 and
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