Silver Company purchased a jewel polishing machine for P360,000 on January 1, 2021 and received a government grant of P50,000 towards the capital cost. Company policy is to treat the grant as a reduction in the cost of the asset. The machine was to be depreciated on a straight-line basis over 8 years and was estimated to have a residual value of P5,000 at the end of this period. Under PAS 20, what should be the depreciation expense in respect of the machine for the year ended December 31 2021? a. 38,750 b. 76,250 c. 44,375 d. 38,125
Silver Company purchased a jewel polishing machine for P360,000 on January 1, 2021 and received a government grant of P50,000 towards the capital cost. Company policy is to treat the grant as a reduction in the cost of the asset. The machine was to be depreciated on a straight-line basis over 8 years and was estimated to have a residual value of P5,000 at the end of this period. Under PAS 20, what should be the depreciation expense in respect of the machine for the year ended December 31 2021? a. 38,750 b. 76,250 c. 44,375 d. 38,125
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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Silver Company purchased a jewel polishing machine for P360,000 on January 1, 2021 and received a government grant of P50,000 towards the capital cost. Company policy is to treat the grant as a reduction in the cost of the asset. The machine was to be depreciated on a straight-line basis over 8 years and was estimated to have a residual value of P5,000 at the end of this period. Under PAS 20, what should be the depreciation expense in respect of the machine for the year ended December 31 2021?
a. 38,750
b. 76,250
c. 44,375
d. 38,125
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