Annual maintenance costs for a machine are ₱ 1,500 this year and are estimated to increase 10% each year every year. What is the present worth of the maintenance cost for six years if a. i = 8% b. i = 10%
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.
Annual maintenance costs for a machine are ₱ 1,500 this year and are estimated to increase 10% each year every year. What is the present worth of the maintenance cost for six years if
a. i = 8%
b. i = 10%
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