Ten years ago, Nana Recovery purchased an equipment to move disabled tractors for Php285,000. The equipment was sold at Php50,000 after 10 years. The use of the equipment gave him an average annual revenue of Php52,000. (a) If the money cost 12% per year, was he able to recover his investment (b) What is the equivalent annual cost if the annual maintenance and operating cost was Php10,000 in year 1 and increased by Ph1000 per year?
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.
Ten years ago, Nana Recovery purchased an equipment to move disabled tractors for Php285,000. The equipment was sold at Php50,000 after 10 years. The use of the equipment gave him an average annual revenue of Php52,000. (a) If the money cost 12% per year, was he able to recover his investment (b) What is the equivalent annual cost if the annual maintenance and operating cost was Php10,000 in year 1 and increased by Ph1000 per year?
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