Use the following information for the next two (2) questions: On February 1, 2019, Fowl Company purchased machinery for P2,400,000 with a 10-year useful life and no residual value. On March 20, 2019, Fowl incurred repairs and maintenance cost to the equipment for P150,000. Fowl used the percentage of sales method is estimating doubtful accounts. Doubtful accounts are estimated to be 6% of sales in each quarter. In 2019, Fowl followed this procedure for the first three quarters. However, in the fourth quarter, Fowl determined that doubtful accounts expense for the year showed be P550,000 based on aging of accounts receivable. Following the calendar year, sales per quarter are: first quarter – P1,500,000, second quarter – P1,000,000, third quarter – P2,000,000, fourth quarter – P1,600,000. What total amount of expenses should be recognized in the first quarter? What total amount of expenses should be recognized in the fourth quarter?
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.
Use the following information for the next two (2) questions:
On February 1, 2019, Fowl Company purchased machinery for P2,400,000 with a 10-year useful life and no residual value. On March 20, 2019, Fowl incurred repairs and maintenance cost to the equipment for P150,000.
Fowl used the percentage of sales method is estimating doubtful accounts. Doubtful accounts are estimated to be 6% of sales in each quarter. In 2019, Fowl followed this procedure for the first three quarters. However, in the fourth quarter, Fowl determined that doubtful accounts expense for the year showed be P550,000 based on aging of
- What total amount of expenses should be recognized in the first quarter?
- What total amount of expenses should be recognized in the fourth quarter?
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