An investment in a certain project can be recovered in 10 years. The investment has no salvage value. If the net income before taxes from this investment is P10,000 annually and income taxes are 20% each year, how much is the cost of investment if depreciation charges are P10,000 annually? a. P100,000 b. P180,000 c. P150,000 d. P80,000
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 investment in a certain project can be recovered in 10 years. The investment has no salvage value. If the net income before taxes from this investment is P10,000 annually and income taxes are 20% each year, how much is the cost of investment if
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