Chicken Wings Company purchased a copier for P447,150 on January 1, 2021. The estimated useful life of the copier at the time of purchase is 5 years and it has a salvage value of 40,650. On January 1, 2022, the company checked its machineries and found out that the useful life of its copier should have been 6 years. Chicken Wings depreciate its all assets using a straight-line method. How much is the carrying value of Chicken Wing Company’s copier on December 31, 2022?
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.
Chicken Wings Company purchased a copier for P447,150 on January 1, 2021. The estimated useful life of the copier at the time of purchase is 5 years and it has a salvage value of 40,650. On January 1, 2022, the company checked its machineries and found out that the useful life of its copier should have been 6 years. Chicken Wings
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