On July 1, 2020, ABC Incorporated accepted several office equipment from a shareholder with original cost of P2,000,000. On the same date, the items had aggregate market value totalling to P1,500,000. No entry has been made by ABC since no consideration was given up for these items. Moreover, cost incurred to recondition the donated items amounted to P100,000 and were charged to operations during the period. Assuming an estimated useful life of 5 years with a 10% salvage value, what is the depreciation expense for the first year under the SYD?
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 July 1, 2020, ABC Incorporated accepted several office equipment from a shareholder with original cost of P2,000,000. On the same date, the items had aggregate market value totalling to P1,500,000. No entry has been made by ABC since no consideration was given up for these items. Moreover, cost incurred to recondition the donated items amounted to P100,000 and were charged to operations during the period. Assuming an estimated useful life of 5 years with a 10% salvage value, what is the
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