A machine cost P480, 000 and has a salvage value of 10% of its cost at the end of its life of 30,000 operating hours. If the machine can produce 50,000 units in its entire life, determine the book value after producing 20 000 units. a. P307 200 b. P326 000 c. P288 000 d. P190 100
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.
A machine cost P480, 000 and has a salvage value of 10% of its cost at the end of its life of 30,000 operating hours.
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