a) What amount had accumulated in the depreciation reserve af the end of 2003 if the declining balance method was used? (b) Using sum-of-the years digit method, determine depreciation charge for 2004 and the book value at the of 2004. (c) If, on June 30, 2003, he decided to sell the old car at book value and buy a new car for P1,000,000, how much more money should jhonny borrow to buy the new car if he used the straight-line method in computing the depreciation every 6 months and made it a point to deposit the said amount in a bank that offers 10 percent compounded semiannually?
a) What amount had accumulated in the depreciation reserve af the end of 2003 if the declining balance method was used? (b) Using sum-of-the years digit method, determine depreciation charge for 2004 and the book value at the of 2004. (c) If, on June 30, 2003, he decided to sell the old car at book value and buy a new car for P1,000,000, how much more money should jhonny borrow to buy the new car if he used the straight-line method in computing the depreciation every 6 months and made it a point to deposit the said amount in a bank that offers 10 percent compounded semiannually?
Chapter8: Depreciation, Cost Recovery, Amortization, And Depletion
Section: Chapter Questions
Problem 47P
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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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