PILAK Mining Company has a copper mine in Marinduque. The company is subject to the pronouncements of the International Accounting Standards Board, and, specifically, IFRS 16. The plant and equipment used in this operation were acquired five years ago for P1,600,000 and have been depreciated using straight-line depreciation over a 20-year life. The controller estimates that the assets have a remaining useful life of 15 years. The controller of the company is preparing the financial statements for the year just ended and notes that the fair value of the plant and equipment is estimated to be P1,300,000 at the close of last year. Prepare the entry (if any) the controller should make under IFRS 16 relating to the current fair value of the plant & equipment. Additionally, assume that the company sold the plant & equipment for P1,300,000 immediately after the end of last уcar. Prepare the entry (if any) required under IFRS 16.
PILAK Mining Company has a copper mine in Marinduque. The company is subject to the pronouncements of the International Accounting Standards Board, and, specifically, IFRS 16. The plant and equipment used in this operation were acquired five years ago for P1,600,000 and have been depreciated using straight-line depreciation over a 20-year life. The controller estimates that the assets have a remaining useful life of 15 years. The controller of the company is preparing the financial statements for the year just ended and notes that the fair value of the plant and equipment is estimated to be P1,300,000 at the close of last year. Prepare the entry (if any) the controller should make under IFRS 16 relating to the current fair value of the plant & equipment. Additionally, assume that the company sold the plant & equipment for P1,300,000 immediately after the end of last уcar. Prepare the entry (if any) required under IFRS 16.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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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.
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