PLO Company purchased a computer for Php60,000 and placed it in operation on 2021 January 2. Depreciation was recorded for 2021 and 2022 using the straight-line method, a six-year life, and an expected salvage value of Php2,400. The introduction of a new model of this computer in 2023 caused the company to revise its estimate of useful life to a total of four years and to reduce the estimated salvage value to zero. Compute the depreciation expense on the computer for 2023.
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.
PLO Company purchased a computer for Php60,000 and placed it in operation on 2021 January 2.
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