Question #294779

Erectors Co. owns earth moving equipment that cost After 8 years it will have estimated salvage value of P18,000.00 Compute the depreciation charge for straight line method for first two years and the book value at the end of 5 years.

1
Expert's answer
2022-02-07T15:34:13-0500

First two years

Straight line Depreciation=(Cost of AssetResidual value)Useful life of an AssetStraight\ line\ Depreciation=\frac{(Cost\ of\ Asset - Residual\ value)}{Useful\ life\ of\ an\ Asset}

Cost of Asset=YCost\ of\ Asset=Y

Residual value=Salvage value=18,000Residual\ value=Salvage\ value=18,000

Useful life=8Useful\ life=8

Assuming Y=100,000Y=100,000

Straightline Annual Depreciation=Straight line\ Annual\ Depreciation = (100,00018,000)8\frac{(100,000-18,000)}{8} =10,250=10,250

The equipment depreciates 10,250 annually.

For the first two years,

Depreciation=10,250×2=20,500\bold{Depreciation = 10,250 \times 2=20,500}


At end of 5 Years

Book value=TotalCostAccumulated DepreciationBook\ value = Total Cost - Accumulated\ Depreciation

Accumulated Depreciation=10,250×5=51,250Accumulated\ Depreciation=10,250 \times 5=51,250

Total cost=100,000Total\ cost = 100,000

Book Value=100,00051,250=48,750\bold{Book\ Value=100,000 -51,250=48,750}


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