A central air conditioning unit was installed on January 1, 2000 at an initial cost of P650,000 and was expected to have a salvage value of P50,000 after a life of 7 years. a. What amount of depreciation had accumulated in a sum-of-the-years’-digit method at the end of 2003? b. Using the declining balance method, determine the depreciation charged for 2004 and the bookvalue at the end of 2004 c. If the equipment was sold on Jan 1, 2005 for P100,000, what amount of loss would result from this sale if sinking fund method was being used with interest of 12% per year?
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.
A central air conditioning unit was installed on January 1, 2000 at an initial cost of P650,000 and was expected to have a salvage value of P50,000 after a life of 7 years.
a. What amount of
b. Using the declining balance method, determine the depreciation charged for 2004 and the bookvalue at the end of 2004
c. If the equipment was sold on Jan 1, 2005 for P100,000, what amount of loss would result from this sale if sinking fund method was being used with interest of 12% per year?
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