During the first 10 years of the life of a certain machine the following were spent for its maintenance: During the first 5 years, P 3,000 was spent each year; during the second 5 years, P 5,000 each year was spent. In addition, P 8,000 was spent for overhauling at the end of the fourth year and P 10,000 also for overhauling at the end of the ninth year. If money is worth 9% compounded annually, what is the equivalent uniform annual cost for the 10-year period?

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A:

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A: CALCULATION: With formula:

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A:

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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.