An equipment costing P3, 015, 000 has an estimated life of 12 years with a salvage value of P200, 000 at the end of the period. Compute the book value at the end of 7 years using sum of the year’s digit method. Select one: a. C7=P 743,346.15 b. C7=P 741,346.15 c. C7=P 742,346.15 d. C7=P 744,346.15
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 equipment costing P3, 015, 000 has an estimated life of 12 years with a salvage value of P200, 000 at the end of the period. Compute the book value at the end of 7 years using sum of the year’s digit method.
C7=P 743,346.15
C7=P 741,346.15
C7=P 742,346.15
C7=P 744,346.15
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