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Land - Php10,000,  Salvage Value - 1,000, Useful Life 9 years. How much is the Annual Depreciation Expense?

Question

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Solution

To calculate the annual depreciation expense, you can use the straight-line depreciation method. Here are the steps:

  1. Determine the cost of the asset: In this case, the cost of the land is Php10,000.

  2. Determine the salvage value of the asset: The salvage value is the estimated value of the asset at the end of its useful life. In this case, the salvage value is Php1,000.

  3. Determine the useful life of the asset: The useful life is the estimated number of years the asset is expected to be used. In this case, the useful life is 9 years.

  4. Subtract the salvage value from the cost of the asset: Php10,000 - Php1,000 = Php9,000. This is the total depreciation over the asset's useful life.

  5. Divide the total depreciation by the useful life of the asset: Php9,000 / 9 years = Php1,000.

So, the annual depreciation expense is Php1,000.

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