A plant bought a new equipment for P220,000 and used it for 10 years, the life span of the equipment. What is the book value of the equipment after 5 years using, assume a scrap value of P22,000. Use 3 different methods Sinking Fund Method Double Declining Method Sum of the years digit Method
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.
A plant bought a new equipment for P220,000 and used it for 10 years, the life span of the equipment. What is the book value of the equipment after 5 years using, assume a scrap value of P22,000.
Use 3 different methods
Sinking Fund Method
Double Declining Method
Sum of the years digit Method
Step by step
Solved in 2 steps with 1 images
