Tycoon Corporation acquired a building on January 1, 2016 at a cost of P50,000,000. The building has an estimated life of 10 years and residual value of P5,000,000. The building was revalued on January 1, 2020 and the revaluation revealed replacement cost of P80,000,000, residual value of P2,000,000 and revised total life of 12 years. The carrying amount of building as of December 31, 2020 is Group of answer choices P42,950,000 P42,700,000 P28,250,000 P48,800,000
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.
Tycoon Corporation acquired a building on January 1, 2016 at a cost of P50,000,000. The building has an estimated life of 10 years and residual value of P5,000,000. The building was revalued on January 1, 2020 and the revaluation revealed replacement cost of P80,000,000, residual value of P2,000,000 and revised total life of 12 years.
The carrying amount of building as of December 31, 2020 is
Step by step
Solved in 3 steps
