On July 1, 2021. A exchanged its non-monetary asset (equipment) with B's non-monetary asset (machinery). The following data were made available: A: Equipment P4,400,000 Accumulated depreciation P2,000,000 Cash received from B 500,000 B: Machinery P3,700,000 Accumulated depreciation 1,800,000 Cash paid to A 500,000 The transaction lacks commercial substance. How much is cost of the new asset of A?
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, 2021. A exchanged its non-monetary asset (equipment) with B's non-monetary asset (machinery). The following data were made available:
A:
Equipment P4,400,000
Cash received from B 500,000
B:
Machinery P3,700,000
Accumulated depreciation 1,800,000
Cash paid to A 500,000
The transaction lacks commercial substance.
How much is cost of the new asset of A?
Step by step
Solved in 2 steps
