On January 1, 2016, the building was recorded at cost of P450, 000. The building was bought on July 1, 2015 with a useful life of 20 years and salvage value of P50, 000.The accumulated depreciation at the end of its second year , July1, 2017 will beSelect one:a.P40,000b.P50,000c.P30,000d.P60,000
Question
On January 1, 2016, the building was recorded at cost of P450, 000. The building was bought on July 1, 2015 with a useful life of 20 years and salvage value of P50, 000.The accumulated depreciation at the end of its second year , July1, 2017 will beSelect one:a.P40,000b.P50,000c.P30,000d.P60,000
Solution
To calculate the accumulated depreciation, we first need to calculate the annual depreciation.
Step 1: Calculate the depreciable amount. The depreciable amount is the cost of the asset minus its salvage value. Depreciable amount = Cost of the asset - Salvage value Depreciable amount = P450,000 - P50,000 = P400,000
Step 2: Calculate the annual depreciation. The annual depreciation is the depreciable amount divided by the useful life of the asset. Annual depreciation = Depreciable amount / Useful life Annual depreciation = P400,000 / 20 years = P20,000
Step 3: Calculate the accumulated depreciation. The accumulated depreciation is the annual depreciation multiplied by the number of years the asset has been in use. Since the building was bought on July 1, 2015, and we are calculating the accumulated depreciation at the end of its second year, July 1, 2017, the building has been in use for 2 years. Accumulated depreciation = Annual depreciation * Number of years Accumulated depreciation = P20,000 * 2 = P40,000
So, the accumulated depreciation at the end of its second year, July 1, 2017, will be P40,000.
Therefore, the correct answer is a. P40,000.
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