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1

Economics Oct 03, 2020

1.A boiler was purchased in 2015 for P12,856,863 with an expected life of 14 years. If its salvage value is expected to be zero, what will the depreciation charge in the 9th year using the SYD method?

2.A used piece of depreciable property was bought for P74.835. If it has a useful life of 13 years and a salvage value of P13,548, how much will it be depreciated in the 9th year. Use declining balance method.

3.A machine costs P725,801 with a scrap value of 10% of the original price at the end of its life of 7 years. What is the annual depreciation by sinking fund at 20%?

Expert Solution

1.Answer  734,641.15 $

Under SYD , The depreciation rate for each year is calculated as number of years left in an asset's life divided by sum of the digits of each year .

Here the denominator will be
= 1+2+3+4+5+6+7 .... + 14
Sum of n digits = n (n+1) / 2
Sum of 14 digits = 14(15)/2
= 105

Total depreciable value = 12,856,863

Numerator for depreciation = (14-9)+1 = 6

Depreciation rate = 6/105 * 100
= 5.714 %


Depreciation Charge
=5.714 % * 12856863
= 734,641.15 $

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3.- Machine cost = P725,801

Scrap value = 10% of cost = 725,801*(10/100) = P72,580.1 , n= 7 years

So, total depreciation accumulated (A) = cost – scrap value = 725,801 – 72,580.1 = P653,220.9

Rate of interest (r) = 20% = 0.2

So, annual depreciation by sinking fund method would be

Where, A: Total depreciation accumulated

r: interest rate for sinking fund

n: no. of years

so,ence, the required annual depreciation using sinking fund method would be P50,578.894.

please see the attached file.

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