Problem 1: A dump truck was bought for P750,000 three years ago. It will have a salvage value of P100,000 two years from now. Using the following methods, determine book value at the end of 3d year, accrued depreciation at the end of 2nd year and annual depreciation cost at the end of 4 year. Show solutions for the asked years.
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.
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