Spaces Company was engaged in the rock and gravel business. The following transactions relate to the acquisition and development of an extensive gravel pit. 2019 Cost of acquisition and development P960,000 Estimated output 2,400,000 tons Production 1,000,000 tons 2020 Additional development cost P490,000 Production 600,000 tons 2021 Additional development cost P500,000 New estimate of remaining output 2,500,000 tons Production 700,000 tons Required: Prepare the journal entries for 2019, 2020 and 2021.
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.
Problem 3
Spaces Company was engaged in the rock and gravel business. The following transactions relate to the acquisition and
development of an extensive gravel pit.
2019
Cost of acquisition and development P960,000
Estimated output 2,400,000 tons
Production 1,000,000 tons
2020
Additional development cost P490,000
Production 600,000 tons
2021
Additional development cost P500,000
New estimate of remaining output 2,500,000 tons
Production 700,000 tons
Required:
Prepare the
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