MBS Inc. acquires a building on February 1, 2019 at a cost of P5,500,000. The building has an estimated useful life of 40 years and an estimated salvage value of P500,000. a. Prepare the following: i. journal entry to record the purchase of building. ii. Adjusting entry on December 31 assuming the company prepares its financial statements on this date. b. Determine the following (show solution): i. amount of expense to be recognized for 2019 ii. book value of the building as of December 31, 20
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.
MBS Inc. acquires a building on February 1, 2019 at a cost of P5,500,000. The building has an estimated useful life of 40 years and an estimated salvage value of P500,000.
a. Prepare the following:
i.
ii.
b. Determine the following (show solution):
i. amount of expense to be recognized for 2019
ii. book value of the building as of December 31, 2019.
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