De La Salle University buys a steam generator for P250,000. The shipping and installation fees amount to P25,850. The manufacturer indicates that the life span of the system is 20 years. The system can sell at P10,000 at the end of its life. Determine the depreciation charge during the 12th year, and the book value at the end of 14 years by the (a) Declining balance method, (b) DDB method, (c) sinking fund method given interest rate at 12.5 percent,
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.
De La Salle University buys a steam generator for P250,000. The shipping and installation fees amount to P25,850. The manufacturer indicates that the life span of the system is 20 years. The system can sell at P10,000 at the end of its life. Determine the
book value at the end of 14 years by the (a) Declining balance method, (b) DDB method, (c) sinking fund method given interest rate at 12.5 percent, and (d) Sum-of-the-Years Digit (SYD) Method.
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