06/29/2012 - Every material does not last forever and that's why buying something requires a wise decision, especially when used in businesses. By recording the expenses, a company can make sure if the product they bought is helping them rather and not pulling them down.
They call this as depreciation schedule. It is a record of how much value is left on a piece of equipment or asset as it is being used. But first, one should know how to get the total depreciation and getting the cost. Which is
Total depreciation
Depreciation = Cost - Scrap Value
Annual Depreciation
total depreciation
--------------------
life value (P per year,unit, hour)
After getting the necessary requirements, the depreciation schedule can now be done;
Year / Hours in operation / Depreciation Charge / Amount in / book value at
/ (in machines) / / depreciation fund / end of year
-------------------------------------------------------------------------------------------------------------------
0 0 0 0 # << cost
-------------------------------------------------------------------------------------------------------------------
1 # # # #
-------------------------------------------------------------------------------------------------------------------
total
*zero values placed are always zero
Everything has a limit in life and exceeding this limits has it's consequences. So it's better to keep in track about what is happening in not only in our daily lives but also the materials we use. And being a student is not an excuse to this practice! practice! practice!
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sample problem: A machine costs P55,500, it has a probable life of 100,000 hours and has a scrap value of P5,000. Make a depreciation schedule of the first three years which has the operation hours of 12,000 , 15,000, and 10,000
SOLUTION
the total depreciation is
Depreciation = Cost - Scrap Value
55,500 - 5,000 = P50,500
the charge for operating hour is
50,500
------------ = 0.51
100,000
Depreciation schedule
Year / Hours in operation / Depreciation Charge / Amount in / book value at
/ (in machines) / / depreciation fund / end of year
-------------------------------------------------------------------------------------------------------------------
0 0
0 0 55,500
-------------------------------------------------------------------------------------------------------------------
1 12,000 12,000(0.51) P6120 6,120 49,380
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2 15,000 15,000(0.51) 7650 13,770 41,730
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3 10,000 10,000(0.51) 5100 18,870 36,630
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total P37,000 P18,870
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checked by Prof. Cris Paner
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