Please complete the solution for this. Draw also the diagram like in the given exampleAn asset was purchased six years ago at a cost of P70,000. It was estimated to have a useful life of ten years with a salvage value of P300 at the end of the time. It is now of no future use and can be sold for only P800. Determine the sunk cost if depreciation has been computed by: a) The straight-line method b) The sinking fund method at 6.5% interest c) The declining balance method with 10% depreciation rate d) The double-declining balance e) The sum-of-the-year's digits method Attached image is for the formula to be use: STRAIGHT LINE METHODassumes that the loss in value is directly proportional to the age of the propertyFCTd₁10₂Source Marvin Miller GarciaDEPRECIATIONSource: Marvin Milier CarciaDEPRECIATIOND,- FC - BV,BV.D-FC-SV d₁ = d₂ = d3 = ... = dD₁n| svSINKING FUND METHODD=FC - SV9FCF=A[¹+0²-¹] D₂ - d[¹+1²-¹] D₂-aª²+²-¹]|d=d₁BVIVd₂D.BV₂ BV.D = FC - SVSVDOUBLE DECLINING BALANCE METHODDEPRECIATIONMarvin Miller GarciaDEPRECIATIONSUM OF THE YEARS' DIGIT(SYD) METHODa form of accelerated depreciation charge that is based on the assumption thatthe productivity of the asset decreases with the passage of timedrDECLINING BALANCE METHODa method of depreciation where assets are depreciated at a higher rate in theinitial years than in the subsequent years. Under this method, a constantdepreciation rate is applied to an asset's (declining) book value each year. Thismethod results in accelerated depreciation and higher depreciation values inthe early years of the life of an asset.D₂ = FC - SVn-r+1SYDD=FC-SVSYD =BOOK VALUEBV, = FC(1-SALVAGE VALUESV = FC(1-=)"(n+1)DEPRECIATION CHARGEd,= BV-1 - BV,d, = IFC(12/n = k = rate of depreciationDepreciation Charge at year r, drx DnCOMPOUND INTERESTP₁i Fo?F = P(1+i)'F₁ - P(1+i) ²F₂ = P(Hi)"remaining useful lifeSum of the Years' Digit, SYDnn=5=770SYD = 1+2+3+4 +5.DECLINING BALANCEP→ FC i-k (decreciatioBV, = FC (I-A)!BV₂ - PC(1-4)²BV = FC(1-k)"SV=F((1-4)"

A depreciation is an expense incurred for usage of fixed tangible assets for revenue generation. It…

Answered: An asset was purchased six years ago at…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Please complete the solution for this. Draw also the diagram like in the given example

An asset was purchased six years ago at a cost of P70,000. It was estimated to have a useful life
of ten years with a salvage value of P300 at the end of the time. It is now of no future use and can
be sold for only P800. Determine the sunk cost if depreciation has been computed by:
a) The straight-line method
b) The sinking fund method at 6.5% interest
c) The declining balance method with 10% depreciation rate
d) The double-declining balance
e) The sum-of-the-year's digits method

Attached image is for the formula to be use:

STRAIGHT LINE METHOD
assumes that the loss in value is directly proportional to the age of the property
FC
Td₁
10₂
Source Marvin Miller Garcia
DEPRECIATION
Source: Marvin Milier Carcia
DEPRECIATION
D,- FC - BV,
BV.
D-FC-SV d₁ = d₂ = d3 = ... = d
D₁
n
| sv
SINKING FUND METHOD
D=FC - SV
9
FC
F=A[¹+0²-¹] D₂ - d[¹+1²-¹] D₂-aª²+²-¹]
|d=
d₁
BVI
V
d₂
D.
BV₂ BV.
D = FC - SV
SV
DOUBLE DECLINING BALANCE METHOD
DEPRECIATION
Marvin Miller Garcia
DEPRECIATION
SUM OF THE YEARS' DIGIT(SYD) METHOD
a form of accelerated depreciation charge that is based on the assumption that
the productivity of the asset decreases with the passage of time
dr
DECLINING BALANCE METHOD
a method of depreciation where assets are depreciated at a higher rate in the
initial years than in the subsequent years. Under this method, a constant
depreciation rate is applied to an asset's (declining) book value each year. This
method results in accelerated depreciation and higher depreciation values in
the early years of the life of an asset.
D₂ = FC - SV
n-r+1
SYD
D=FC-SV
SYD =
BOOK VALUE
BV, = FC(1-
SALVAGE VALUE
SV = FC(1-=)"
(n+1)
DEPRECIATION CHARGE
d,= BV-1 - BV,
d, = IFC(1
2/n = k = rate of depreciation
Depreciation Charge at year r, dr
x Dn
COMPOUND INTEREST
P₁i Fo?
F = P(1+i)'
F₁ - P(1+i) ²
F₂ = P(Hi)"
remaining useful life
Sum of the Years' Digit, SYD
n
n=5
=770
SYD = 1+2+3+4 +5.
DECLINING BALANCE
P→ FC i-k (decreciatio
BV, = FC (I-A)!
BV₂ - PC(1-4)²
BV = FC(1-k)"
SV=F((1-4)"

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Section 179 Deduction and Modified Accelerated Cost Recovery System (MACRS) Depreciation

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