On October 1, 2015, PCU Company purchased machinery for P1,900,000. Salvage value was estimated to be P100,000. The machinery will be depreciated over eight years using the sum-of –years’ digits method. If depreciation is computed based on the nearest full month, how much should PCU record as depreciation expense for 2020?
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 October 1, 2015, PCU Company purchased machinery for P1,900,000. Salvage value was estimated to be P100,000. The machinery will be
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