Answer to Question #193847 in Financial Math for King

Question

Construct a depreciation schedule for the following problems

3.) Duncan bakery purchased a new bread oven for ₱125,000. Shipping charges were ₱1500 and installation amounted to₱ 750. The oven is expected to last five years and has a residual value of ₱5000. If Duncan elects to use use the straight line method, calculate the total cost, total depreciation. And annual depreciation of the oven. Prepare a schedule.

Answer 1

First, we need to find the total purchase cost of the asset.

Purchase price                                                      ₱125,000

Shipping Charges                                                   ₱1,500

Installation amount                                                  ₱750

=Purchase price +Shipping Charges   +Installation amount 

$= ₱125,000+₱1,500+ ₱750=₱ 127,250$

 Therefore the total cost of the asset ₱ 127,250.

Given:

Cost of the asset ₱127,250

Residual Value   ₱ 5,000

The life of the asset is 5 years 

Annual Depreciation$=\frac{(Cost \space of\space Asset-Salvage \space value)}{Useful\space life\space of\space the\space asset}$

Substituting the values in the equation:

Annual Depreciation$=\frac{(₱127,250-₱5000)}{5} = ₱24,450$

Therefore, annual depreciation is ₱24,450.

Total Depreciation $=Cost \space of\space Asset -Residual\space value$

               $=₱127,250-₱5000 =₱ 122,250$

Therefore , the total depreciation is₱ 122,250