An industrial plant bought a generator set for 90,000. Other expenses including installation amounted to 10,000. The generator set is to have a life of 17 years with a salvage value at the end of life of 5,000. Determine the depreciation charge during the 13th year and the book value at the end of 13 years by the (a) declining balance method, (b) double declining balance method, (c) sinking fund method at 12% and (d) SYD method.
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 industrial plant bought a generator set for 90,000. Other expenses including installation
amounted to 10,000. The generator set is to have a life of 17 years with a salvage value at the end of
life of 5,000. Determine the
method at 12% and (d) SYD method.
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