Determine the difference between the capitalized cost of the timber and steel penstock for a hydroelectric plant with interest of 10%: Timber Steel First Cost Php50,000 Php80,000 Estimated Life 10 years 30 years Scrap Value Php2,000 None Annual Maintenance Php1,200 Php200 Show calculations for the capitalized cost of each item separately.
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.
Determine the difference between the capitalized cost of the timber and steel penstock for a hydroelectric plant with interest of 10%:
| Timber | Steel | |
| First Cost | Php50,000 | Php80,000 |
| Estimated Life | 10 years | 30 years |
| Scrap Value | Php2,000 | None |
| Annual Maintenance | Php1,200 | Php200 |
Show calculations for the capitalized cost of each item separately.
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