The initial cost of a paint sand mill, including its installation is P 800,000. The depreciable life of this machine is 10 years with an estimated salvage value of P 50,000. Using SL Method -Compute the annual depreciation charge. -Compute the total depreciation after 6 years. -Compute the book value after 6 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.
Solve the following problems. Show clean and complete details of your work for each number.
Problem 1: The initial cost of a paint sand mill, including its installation is P 800,000. The
-Compute the annual depreciation charge.
-Compute the total depreciation after 6 years.
-Compute the book value after 6 years.
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