Robertson Company had purchased an equipment on January 1, 2019 for P 4,800,000. The entity used the straight-line method of depreciation based on a ten-year estimated useful life with no residual value. During 2022, the entity decided that the equipment would be used only three more years and then replaced with a technologically superior model. What entry should be made on January 1, 2022 to reflect the change? a. Debit other comprehensive income and credit accumulated depreciation, P 480,000. b. Debit depreciation and credit accumulated depreciation, P 560,000. c. Debit retained earnings and credit accumulated depreciation, P 480,000. d. No entry
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.
Robertson Company had purchased an equipment on January 1, 2019 for P 4,800,000. The entity used the straight-line method of
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