An asset was purchased six years ago at a cost of P7,000. It was estimated to have a useful life of ten years with a salvage value of 300 at the end of the time. It is now of no future use and can be sold for only P800. Determine the sunk cost if the depreciation has been computed by: a. The straight-line method. b. The sum-of-the-year’s digits 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.
. An asset was purchased six years ago at a cost of P7,000. It was estimated to have a useful life of
ten years with a salvage value of 300 at the end of the time. It is now of no future use and can be sold
for only P800. Determine the sunk cost if the
a. The straight-line method.
b. The sum-of-the-year’s digits method
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