Reference no: EM133135681

Question - Harvey Company, an SME, acquired a machine on January 1, 2019 for P8,000,000. The machine has a 10-year useful life, a P500,000 residual value, and is to be depreciated using the straight line method. By the end of 2020, the machine was damaged by a major accident occurring in the plant. The entity's engineers and technicians could not repair this damage and therefore the machine's performance was expected to decline in the future and unlikely to be sold at the end of its useful life. Thus, the machine has a zero residual value. On December 31, 2020, a test for recoverability revealed that the expected net future undiscounted cash flows related to the continued use and eventual disposal of the machine totaled P7,000,000. The machine's fair value on December 31, 2020 is P6,600,000 while the discounted net future cash flows amount to P6,300,000. What is the depreciation expense for the year ended December 31, 2021?