Parable Company’s depreciation policy on machinery and equipment is as follows: *A full year’s depreciation is taken in the year of an asset’s acquisition * No depreciation is taken in the year of an asset’s disposition * The estimated useful life is five years * the straight line method is used On June 30, 2019, the entity sold for P2,300,000 a machine acquired in 2016 for P4,200,000. The estimated residual value was P600,000. What amount of gain on disposal should be recorded in 2019? P980,000 P140,000 P260,000 P620,000
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.
Parable Company’s
P980,000
P140,000
P260,000
P620,000
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