Depreciation is a way of accounting for the cost of an asset when income is determined for
Question:
Depreciation is a way of accounting for the cost of an asset when income is determined for tax purposes. The cost, including any delivery or installation charges, is treated as a prepayment for future services; and the depreciation consists in amortizing this prepayment over the period of use of the asset. The current tax law permits only assets with a useful life or more than one year to be depreciated. For instance, a commercial building was constructed at a cost of P 1,511,722. This building was estimated to have a useful life of 50 years with no scrap value. If depreciation charges had been set as follows:
For the first 15 years, double declining balance method has been used.
For succeeding 15 years, sum of years digit method has been used
For the next succeeding 10 years, Straight line method.
How much is the building worth at the end of 40 years?