On January 1, 20x1, NURTURE REAR Co. acquired a building with an estimated useful life of 10 years and residual value of P400,000 for a total cost of P4,000,000. The fair value of the building on January 1, 20x1 is P4,800,000 while the fair value on December 31, 20x1 is P5,200,000. NURTURE estimates that if the building is sold currently on December 31, 20x1, costs to sell amount to P200,000. NURTURE uses the straight line method in depreciating its PPE. NURTURE uses the fair value model for its investment properties. The year-end adjusting entry will include *

On January 1, 20x1, NURTURE REAR Co. acquired a building with an estimated useful life of 10 years and residual value of P400,000 for a total cost of P4,000,000. The fair value of the building on January 1, 20x1 is P4,800,000 while the fair value on December 31, 20x1 is P5,200,000. NURTURE estimates that if the building is sold currently on December 31, 20x1, costs to sell amount to P200,000. NURTURE uses the straight line method in depreciating its PPE. NURTURE uses the fair value model for its investment properties. The year-end adjusting entry will include *

Name: On January 1, 20x1, NURTURE REARCo. acquired a building with anestima
Uploaded: 2024-03-05T11:50:36.000Z
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Description: On January 1, 20x1, NURTURE REARCo. acquired a building with anestimated useful life of 10 years andresidual value of P400,000 for atotal cost of P4,000,000. The fairvalue of the building on January 1,20x1 is P4,800,000 while the fairvalue on Decemb

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

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, 20x1, NURTURE REAR
Co. acquired a building with an
estimated useful life of 10 years and
residual value of P400,000 for a
total cost of P4,000,000. The fair
value of the building on January 1,
20x1 is P4,800,000 while the fair
value on December 31, 20x1 is
P5,200,000. NURTURE estimates
that if the building is sold currently
on December 31, 20x1, costs to sell
amount to P200,000. NURTURE uses
the straight line method in
depreciating its PPE. NURTURE uses
the fair value model for its
investment properties. The year-end
adjusting entry will include

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Brea plc, which has a financial year end of 31 December, has an item of plant which meets the criteria to be classified as held for sale at 1 July 20X9. The original cost of the asset was $120,000 with an estimated useful life of 10 years and, at 1 January 20X9, had accumulated depreciation of $36,000. At 1 July 20X9 the fair value of the plant is $50,000 with costs to sell estimated at $4,000. a) Show how this asset would be accounted for in the 20X9 financial statements. b) Suppose that the plant is still held for sale at 31 December 20X9, and, at this date, the fair value and estimated costs to sell are respectively: (i) $45,000 and $4,000. (ii) $55,000 and $5,000 For(i) and (ii) show how the changes in fair value less costs to sell would be accounted for in the books of accounts
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