TAKDER Co. purchased four convenience store buildings on January 1, 2014, for a total of P22,000,000. The buildings have been depreciated using the straight-line method with a 20-year useful life and 5 % residual value. As of January 1, 2021, TAKDER Co. has converted the buildings into Internet Learning Centers. Because of the change in the use of the buildings, TAKDER Co. is evaluating the buildings for possible impairment. The firm estimates that the buildings have a remaining useful life of 10 years, that their residual value will be zero and net cash inflow from each building will be P500,000 per year and the appropriate pre-tax discount rate that reflects current market assessments of time value of money is 12%. Net selling price on the four buildings is not clearly determinable. What amount of impairment loss, if any, should be recognized? * None P3,385,000 P4,435,000 P5,560,000 answer not given
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.
TAKDER Co. purchased four convenience store buildings on January 1, 2014, for a total of P22,000,000. The buildings have been
None
P3,385,000
P4,435,000
P5,560,000
answer not given
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