An engineer bought equipment for P600,000. Other expenses including installation amounted to P30,000. At the end of its estimated useful life, of 10 years, the salvage value will be 10% of the first cost. What is the book value after 5 years using: A. Straight Line Method. B. Sum of the Years Digit
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.
An engineer bought equipment for P600,000. Other expenses including installation amounted to P30,000. At the end of its estimated useful life, of 10 years, the salvage value will be 10% of the first cost. What is the book value after 5 years using:
A.
B. Sum of the Years Digit
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