An asset with a cost of P1,200,000 is to be depreciated over 10 years with residual value. Profit afterdepreciation for the first five (5) years are as follows:Year 1120,000.00Year 2170,000.00Year 3280,000.00Year 4370,000.00Year 580,000.00Required: Compute for the Payback Period to the nearest month. ABC Company wants to purchase a new line of machinery. Two (2) models are available, one (1) has a slightlyhigher capacity than the other. The costs and expected benefits are as follows:Machine XMachine YAcquisition cost80,000.00150,000.00Estimated useful life55Profit before depreciationYear 150,000.0050,000.00Year 250,000.0050,000.00Year 330,000.0060,000.00Year 420,000.0060,000.00Year 510,000.0060,000.00Required: Using Accounting Rate of Return, which equipment should be selected by ABC Company? Showyour solution.

Name: An asset with a cost of P1,200,000 is to be depreciated over 10 years
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Description: An asset with a cost of P1,200,000 is to be depreciated over 10 years with residual value. Profit afterdepreciation for the first five (5) years are as follows:Year 1120,000.00Year 2170,000.00Year 3280,000.00Year 4370,000.00Year 580,000.00Required:

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Accounting

An asset with a cost of P1,200,000 is to be depreciated over 10 years with residual value. Profit af depreciation for the first five (5) years are as follows: Year 1 120,000.00 Year 2 170,000.00 Year 3 280,000.00 Year 4 370,000.00 Year 5 80,000.00 Required: Compute for the Payback Period to the nearest month.

An asset with a cost of P1,200,000 is to be depreciated over 10 years with residual value. Profit af depreciation for the first five (5) years are as follows: Year 1 120,000.00 Year 2 170,000.00 Year 3 280,000.00 Year 4 370,000.00 Year 5 80,000.00 Required: Compute for the Payback Period to the nearest month.

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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Concept explainers

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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Question

An asset with a cost of P1,200,000 is to be depreciated over 10 years with residual value. Profit after
depreciation for the first five (5) years are as follows:
Year 1
120,000.00
Year 2
170,000.00
Year 3
280,000.00
Year 4
370,000.00
Year 5
80,000.00
Required: Compute for the Payback Period to the nearest month.

ABC Company wants to purchase a new line of machinery. Two (2) models are available, one (1) has a slightly
higher capacity than the other. The costs and expected benefits are as follows:
Machine X
Machine Y
Acquisition cost
80,000.00
150,000.00
Estimated useful life
5
5
Profit before depreciation
Year 1
50,000.00
50,000.00
Year 2
50,000.00
50,000.00
Year 3
30,000.00
60,000.00
Year 4
20,000.00
60,000.00
Year 5
10,000.00
60,000.00
Required: Using Accounting Rate of Return, which equipment should be selected by ABC Company? Show
your solution.

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