Assume the following PPE: Cost Residual Value Est. Useful Life (years) Building 10,000,000 500,000 20 Machinery 5,000,000 200,000 10 Delivery Equipment 2,000,000 200,000 5 Office Equipment 400,000 - 5 14. Using composite method, compute the composite life in years. Round off to two decimal places. Ex: 12.34 15. Compute the composite depreciation rate. Round off to two decimal places. Ex.:12.34% 16. How much is the annual depreciation as per table? 17. Give the entry to record sale of delivery equipment at the end of the 4th year for P70,000. 18. How much is the depreciation for the 5th year? (Use the rounded off rate) 19. How much is the depreciation for the 5th year assuming a new delivery equipment is purchased for P2,200,000 at the beginning of the 5th year? (Use the rounded off rate)
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.
Assume the following PPE:
| Cost | Residual Value | Est. Useful Life (years) | |
| Building | 10,000,000 | 500,000 | 20 |
| Machinery | 5,000,000 | 200,000 | 10 |
| Delivery Equipment | 2,000,000 | 200,000 | 5 |
| Office Equipment | 400,000 | - | 5 |
14. Using composite method, compute the composite life in years. Round off to two decimal places. Ex: 12.34
15. Compute the composite
16. How much is the annual depreciation as per table?
17. Give the entry to record sale of delivery equipment at the end of the 4th year for P70,000.
18. How much is the depreciation for the 5th year? (Use the rounded off rate)
19. How much is the depreciation for the 5th year assuming a new delivery equipment is purchased for
P2,200,000 at the beginning of the 5th year? (Use the rounded off rate)
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