industrial plant bought a generator set for P250T, other expenses including installation amounted to P10T. The generator set is to have a life of 10 years with a salvage value at the end of life is 5% of the original cost. Determine the book value at the end of 5th year using SF at 12%. a. P170,402.103 b. P140,702.105
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 industrial plant bought a generator set for P250T, other expenses including installation amounted to P10T. The generator set is to have a life of 10 years with a salvage value at the end of life is 5% of the original cost. Determine the book value at the end of 5th year using SF at 12%.
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