On January 2, 2017, Cancer Company purchased transportation equipment costing P2,400,000. The new asset has an estimated useful life of 8 years with no salvage value. Cancer Company depreciates this type of asset using the straight-line method. On January 2, 2019, Cancer determined that the machine has a useful life of 6 years from the date of acquisition with no salvage value. As a result of the change in the estimated useful life of the asset, what is the carrying amount of the transportation equipment as of December 31, 2019?
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 2, 2017, Cancer Company purchased transportation equipment costing P2,400,000. The new asset has an estimated useful life of 8 years with no salvage value. Cancer Company
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