Poe Company disclosed that the depreciation policy on machinery is as follows: - A full year depreciation is taken in the year of acquisition. - No depreciation in the year of disposition. - The estimated useful life is five years. - The straight line method is used. On June 30, 2018, the entity sold for P 2 300 000 a machine acquired in 2015 for P 4 200 000. The residual value was P 600 000. What amount of the gain on the disposal should be recorded in 2018?
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.
Poe Company disclosed that the
- A full year depreciation is taken in the year of acquisition.
- No depreciation in the year of disposition.
- The estimated useful life is five years.
- The
On June 30, 2018, the entity sold for P 2 300 000 a machine acquired in 2015 for P 4 200 000. The residual value was P 600 000.
What amount of the gain on the disposal should be recorded in 2018?
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