purchased an equipment for its manufacturing plant that costs PHP 3, 750 000 + PHP 10,000 x (01). It is estimated to have a useful life of 20 years; scrap value of PHP 375, 000, production of 12,345,678 + 15,000 x (01) units and working hours of 100,000 + 1,500 hours x (01). The company uses the equipment for 7,884 hours and produced 876,543 units on the first year and 7,883 hours and produced 987,654 units on the second year. Solve for the following: d. Sinking Fund Method (i=8%) - Book value at the end of the 1st year Kindly provide a COMPLETE and CLEAR soluti
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.
AEC purchased an equipment for its manufacturing plant that costs PHP 3, 750 000 + PHP 10,000 x (01). It is estimated to have a useful life of 20 years; scrap value of PHP 375, 000, production of 12,345,678 + 15,000 x (01) units and working hours of 100,000 + 1,500 hours x (01). The company uses the equipment for 7,884 hours and produced 876,543 units on the first year and 7,883 hours and produced 987,654 units on the second year. Solve for the following:
d. Sinking Fund Method (i=8%)
- Book value at the end of the 1st year
Kindly provide a COMPLETE and CLEAR solution.
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