You bought a smartphone at 20,000 Php. At the end of its economic life of four years, its salvage value is Php 2,000. Using Sum of the Years Digit Method of Depreciation, what will be its book value for the third year? Tabulate the annual depreciation and book value.
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.
You bought a smartphone at 20,000 Php. At the end of its economic life of four years, its salvage value is Php 2,000. Using Sum of the Years Digit Method of
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