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Homework answers / question archive / Turks company purchased an equipment on January 1, 2020 for P5,000,000
Turks company purchased an equipment on January 1, 2020 for P5,000,000.00. The equipment had an estimated 5 year useful life. The accounting policy for 5 year assets is to use the 200% double declining balance method for the first 2 years of assets and then switch to straight line depreciation. On December 31, 2022 what amount should be reported as accumulated depredation?
Computation of Accumulated Depreciation:
Given,
Original Cost of Asset = P5000000
Life of Asset = 5 Year
Residual Value of Asset = Nil
Depreciation under 200% Double Declining Balance Method:
Depreciation Rate = 1/5 * 100 * 2 = 40%
Depreciation for first 2 years
Year 1 = P5000000 * 40% = P2000000
Year 2 = ( P5000000 - P2000000) * 40% = P3000000 * 40% = P1200000
Depreciation for 2022, using Straight Line Method:
Depreciated value of asset after 2 years = P5000000- P2000000 - P1200000 = P1800000
Remaining Life = 3 Years
Depreciation for the year = P1800000 / 3 = P600000
Accumulated Depreciation on December 31, 2022 = P2000000+P1200000+P600000 = P3800000
