Shine Corporation bought equipment on April 2, 2017 for P200,000. This equipment had an estimated useful life of 5 years and a salvage value of P20,000. Depreciation was computed using the sum of the years’ digits method. The equipment was sold for P120,000 on June 30, 2019. Prepare complete journal entries with supporting computation for the years 2017, 2018 and 2019.
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.
.Shine Corporation bought equipment on April 2, 2017 for P200,000. This equipment had an estimated useful life of 5 years and a salvage value of P20,000.
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 2 images
