A certain machine has book value of P140,452.78 after 5 years and P66,037.08 after 8 years. The book value is computed using Constant Percentage Method. Determine the initial cost of the equipment and its salvage value in its economic life of 10 years. O P650,000
A certain machine has book value of P140,452.78 after 5 years and P66,037.08 after 8 years. The book value is computed using Constant Percentage Method. Determine the initial cost of the equipment and its salvage value in its economic life of 10 years. O P650,000
Chapter9: Capital Budgeting And Cash Flow Analysis
Section9.A: Depreciation
Problem 5P
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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.
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![A certain machine has book value of P140,452.78 after 5 years and P66,037.08
after 8 years. The book value is computed using Constant Percentage Method.
Determine the initial cost of the equipment and its salvage value in its economic
life of 10 years.
P650,000
P500,000
P600,000
P550,000](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fda981f1d-c283-4f33-81c7-6282e58f45f5%2Ff06b2e87-f0a1-4fdb-a6d3-42974a7597ef%2Fd9b188x_processed.png&w=3840&q=75)
Transcribed Image Text:A certain machine has book value of P140,452.78 after 5 years and P66,037.08
after 8 years. The book value is computed using Constant Percentage Method.
Determine the initial cost of the equipment and its salvage value in its economic
life of 10 years.
P650,000
P500,000
P600,000
P550,000
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