On January 1, 2020, Joker Company purchased equipment with cost of P10,000,000, useful life of 10 years and no residual value. The entity used straight line depreciation. On December 31, 2020 and December 31, 2021, the entity determined that impairment indicators are present. The following information is available for impairment testing at each year end: December 31, 2020 December 31, 2021 Fair value less cost of disposal 8,100,000 8,400,000 Value in use 8,550,000 8,200,000 There is no change in useful life or residual value. What amount should be reported in the income
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, 2020, Joker Company purchased equipment with cost of P10,000,000, useful life of 10 years and no residual value. The entity used straight line
December 31, 2020 December 31, 2021
Fair value less cost of disposal 8,100,000 8,400,000
Value in use 8,550,000 8,200,000
There is no change in useful life or residual value. What amount should be reported in the income statement for 2021?
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