On March 31, 2020, Shooter Corp. retired a machine used in manufacturing designer parts. The machine was acquired May 1, 2017. Straight-line depreciation method was used. The asset had an estimated residual value of P20,000 and a five-year life. On December 31, 2019, the balance in the accumulated depreciation is P330,000. The machine was scrapped and the company did not receive a single consideration. The loss on retirement is P277,812 P300,000 P250,000 P270,000
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 March 31, 2020, Shooter Corp. retired a machine used in manufacturing designer parts. The machine was acquired May 1, 2017.
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