6. A telephone company purchased a microwave radio equipment for P6,000,000. Freight and installation charges amounted to 3% of the purchase price. If the equipment shall be depreciated over a period of 8 years with a salvage value of 5%, determine the following: (a) Annual depreciation charge using the straight line method. (b) Depreciation charge during the fifth year using the sum-of- the-years-digits method. Ans. (a) P733,875 (b) P652,333
6. A telephone company purchased a microwave radio equipment for P6,000,000. Freight and installation charges amounted to 3% of the purchase price. If the equipment shall be depreciated over a period of 8 years with a salvage value of 5%, determine the following: (a) Annual depreciation charge using the straight line method. (b) Depreciation charge during the fifth year using the sum-of- the-years-digits method. Ans. (a) P733,875 (b) P652,333
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Concept explainers
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.
Topic Video
Question
6
Transcribed Image Text:6. Atelephone company purchased a microwave radio equipment
for P6,000,000. Freight and installation charges amounted to 3% of
the purchase price. If the equipment shall be depreciated over a period
of 8 years with a salvage value of 5%, determine the following:
FECH
(a) Annual depreciation charge using the straight line method.
(b) Depreciation charge during the fifth year using the sum-of-
the-years-digits method.
Ans. (a) P733,875 (b) P652,333
71
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 4 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education