On January 1, 2019, Layman Company purchased personal computers for P6,000,000. The management estimated that the computers would last approximately 4 years with a residual value of P600,000. The entity used the double-declining balance method. In January 2020, the management realized that technological advancement had made the computers virtually obsolete and proposed changing the remaining useful life to 2 years. What amount of depreciation should be recognized for 2020?
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.
On January 1, 2019, Layman Company purchased personal computers for P6,000,000. The management estimated that the computers would last approximately 4 years with a residual value of P600,000. The entity used the double-declining balance method.
In January 2020, the management realized that technological advancement had made the computers virtually obsolete and proposed changing the remaining useful life to 2 years.
What amount of
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