The following are available from Pinkish Gambino: Machinery Equipment Cost of Acquisition P560,000 P140,000 Estimated Salvage Value 60,000 20,000 Date of Acquisition January 1, 2020 July 1, 2020 Estimated Life 10 years 5 years
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.
The following are available from Pinkish Gambino:
|
|
Machinery |
Equipment |
|
Cost of Acquisition |
P560,000 |
P140,000 |
|
Estimated Salvage Value |
60,000 |
20,000 |
|
Date of Acquisition |
January 1, 2020 |
July 1, 2020 |
|
Estimated Life |
10 years |
5 years |
On October 1, 2023, the above machinery was sold for P400,000 while the equipment could no longer be used on March 31, 2023 and the company received P50,000 from the insurers in full settlement of the claim.
How much is the net gain or net loss from the disposal of the assets above?
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