AN ELECTRONIC BALANCE COSTS P90,000 AND HAS AN ESTIMATED SAVLAGE VALUE OF P8000 AT THE

END OF ITES 10 YRS. LIFEIME WHAT WOULD THE BOOK VALUE AFTER THREE YEARS USING STRAIGHT
LINE METHOD IN SOLVING THE DEPRECIATION? PROVE THE ANS. OF P65,400.00

SOLUTION:

A BROADCASTING CORPORATION PURCHASED AN EQUIPMENT FOR P53,000.00 AND PAID P1500 FOR
FREIGHT AND DELIVERY CHARGES TO HE JOB SITE. HE EQUIPMENT HAS A NORMAL LIFE OF 10 YRS. WITH
A RADE IN VALUE OF P5,000.00 AGAINST THE PURCHASE OF A NEW EQUIPMENT AT THE END OF THE
LIFE

A.) DETERMINE THE ANNUAL DEPRECIATION COST BY THE STRAIGH LINE METHOD
B.) DETERMINE THE ANNUAL DEPRECIATION COST BY THE SINKING FUND METHOD, ASSUME
INTERST AT 6.5% COMPOUNDED ANNUALLY ANS. A.) P4950 B.)P3668 PROVE.

SOLUTION:

A CONSURIUM OF INTERNATIONAL TELECOMMMUNICATION COMPANIES CONTRACTED FOR THE

PURCHASE AND INSTALLATION OF A FIBER OPTIC CABLE LINKING TWO MAJOR CITIES AT TA TOTAL COST
OF 960 MILLION. THIS AMOUNT INCLUDES FREIGHT AND INSTALLATION CHARGES ESTIMATED AT 10% OF
THE ABOVE CONTRAC PRICE. IF HE CABLE SHALL BE DEPRECIATED OVER A PERIOD OF 15 YEARS WITH
ZERO SALVAGE VALUE

A.) GIVEN THE SINKING FUND DEPOSIT FACTOR OF 0.0430 AT 6% INTEREST WHERE N=15 WHAT
IS THE ANNUAL DEPRECIATION CHARGE ANS.: P41,280,000
B.) WHAT IS THE DEPRECIATION CHARGE USING THE 8TH YEAR USING THE SUM OF THE YEARS
METHOD ANS: 64 MILLION