1. An industrial plant purchase of assorted materials for production which cost in the amount of 64,000 pesos and paid 2,400 pesos for handling and delivery to the job site of the plant. The materials has a useful life of 8 years with a trade in value of 4,000 pesos. a. Determine the annual depreciation cost by straight line method. b. Determine the annual depreciation cost by the sinking fund method assume interest rate at 5% compounded annually
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.
1. An industrial plant purchase of assorted materials for production which cost in the amount of 64,000 pesos and paid 2,400 pesos for handling and delivery to the job site of the plant. The materials has a useful life of 8 years with a trade in value of 4,000 pesos.
a. Determine the annual
b. Determine the annual depreciation cost by the sinking fund method assume interest rate at 5% compounded annually.
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