Sinking Fund Method Of Depreciation Sample Problem With Solution

Explain about Diminishing balance method in depreciation. Suppose that the account has an annual interest rate of compounded times per year so that is the interest rate per compounding period.

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I Sinking fund or present worth method ii Retirement method iii Replacement.

Sinking fund method of depreciation sample problem with solution. It is suitable for plant and machinery and many other wasting assets which require replacement. The company will keep it for 3 years and it can be sold at 25000 at that time. The sum-of-year digits method gives an accelerated depreciation compared to the straight-line method.

For Ledger accounts format refer. Explain about Units of production method in depreciation. If you make a payment of at the end of each.

Explain the concept of. Thus the sinking fund method. Double Declining Balance Method.

Example of the sinking fund method of depreciation. The annual depreciation cost by sinking-fund method at 4 interest is P79126. Consistent methods based on time a Methods giving smaller writes-off than straight line in early years of life.

Units of Output Method. Interest is 10 percent. 5000000- life span of equipment is 15 yearsnSalvage value Rs.

Sinking fund method of depreciation sample problem with solution Ray is a licensed engineer in the Philippines. View Sample Problems on Depreciationdocx from COLLEGE OF 101 at San Sebastian College - Recoletos de Cavite. A company has purchased an equipment whose first cost is Rs.

This method of depreciation is suitable for costly but wasting assets. On the other hand the sinking fund is a decelerated method compared with the straight-line method. Determine the depreciation charge at the end of 5th and book value at the end of 7th year.

As a result the working capital of business is preserved. A Sinking fund method Grant and Norton classified the depreciation accounting method other than straight line method in the following categories. Determine the sinking fund depreciation for each of the 3 years.

Example problem on sinking fund method of depreciation -2. HttpsyoutubehrL8sKc8YGgComputation of depreciation under sinking fund method is discussed in tamil. The salient feature of sinking fund method is that it provides funds for replacement of the asset.

250000- interest rate 10. But it may sometimes happen that the amount is not readily available at the time of purchase of the new asset. Calculate the sinking fund depreciation allowance for a company-owned executive car having a cost basis of 60000.

The depreciation under this method can be calculated with the help of a Sinking Fund table for a particular period at a given rate of interest. SAMPLE PROBLEMS ON DEPRECIATION. An equipment costs P10000 with a salvage value of P500 at the end of 10 years.

He loves to write about mathematics and civil engineeringWhat Is DepreciationDepreciation means the decrease in the value of physical properties or assets with the passage of time and use. Using below data calculate depreciation using sinking fund methodnInitial cost of an equipment is Rs. The special feature of this method is that the sum required to buy the new asset is available from depreciation or sinking fund.

It decided to provide cash for the replacement of the lease at the end of the 4th year by setting up a sinking fund. Purchase a machine on 01042012 on lease for 4 years for Rs 1000000-. The estimated salvage value of the equipment at the end of its lifetime is Rs.

100000 with an estimated life of eight years. Calculate the annual depreciation cost by sinking-fund method at 4 interest. The accounting entries are as follows.

Sinking fund method is specially applicable to costly machines in large scale industries. Depreciation by Depreciation Fund Method Without Scrap Value. It is designed in such a way that apart from providing depreciation on the asset it provides the required funds for the replacement of the asset.

Contents show Depreciation Problems and Solutions. Depreciation is charged every year to the profit and loss Ac. A and B Pvt.

It is expected that investment will fetch interest 5. Sinking fund method is used when the cost of replacement of an asset is too large. However the straight-line method is the commonly used for calculating asset depreciation.

Sum of Year Digit Method. Annuities and Sinking Funds Sinking Fund A sinking fund is an account earning compound interest into which you make periodic deposits.

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