Answered: . The SF Method (Sinking Fund Method)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

An asset for drilling was purchased and placed in service by a petroleum production company. Its cost basis is $60,000 and it has an estimated MV of $12,000 at the end of an estimated useful life of 14 years. Compute the accumulated depreciation in the third year and the BV at the end of 5th year of life by each of these methods at the rate of 9%:

a. The SF Method (Sinking Fund Method)
- Provide the complete solution and cash flow diagram

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