At the beginning of the year Joeker Company brought machinery under a contract that required a down payment of P50,000 , plus 24 monthly payments of 25,000 each , for total cash payments of P650,000 . The cash price of the machinery was P550,000 . The machinery has a useful life of 10 years and residual value of P25,000 Joeker uses the straight -line method of depreciation How much should Joeker report as interest expense as a result of the above acquisition ? Select the correct response 55,000 5, 000 52,500 100,000

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A:

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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.