A plant bought a calciner for P220,000 and used it for 10 years, the life span of the equipment. Assume a scrap value of P20,000 for straight line method; P22,000 for textbook declining balance method and P20,000 for the double declining balance method. What is the book value of the calciner after 6 years of use? (a) Using Straight Line Method (b) Using Declining Balance Method (c) Using Double Declining Balance Method
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 plant bought a calciner for P220,000 and used it for 10 years, the life span of the equipment. Assume a scrap value of P20,000 for
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