A surveillance equipment bought by FabLab Mindanao 2 years ago has been book-depreciated by the straight-line method using a 5-year useful life. If the book value at the end of year 2 is ₱240,000 and the company assumed that the equipment would be worthless at the end of its 5-year useful life, a) What is the book depreciation charge each year? b) What was the first cost of the equipment?
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 surveillance equipment bought by FabLab Mindanao 2 years ago has been book-
a) What is the book depreciation charge each year?
b) What was the first cost of the equipment?
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