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According to fixed instalment method, the depreciation is calculated on  Original cost   None of the given options   Balance amount   Scrap value

Question

According to fixed instalment method, the depreciation is calculated on:

  • Original cost
  • None of the given options
  • Balance amount
  • Scrap value
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Solution

According to the fixed installment method, depreciation is calculated on the original cost of the asset.

Here are the steps to calculate depreciation using the fixed installment method:

  1. Determine the original cost of the asset. This is the price paid to acquire the asset.

  2. Determine the expected useful life of the asset. This is the number of years the asset is expected to be in service.

  3. Determine the scrap value of the asset. This is the expected value of the asset at the end of its useful life.

  4. Subtract the scrap value from the original cost. This gives you the total depreciation over the asset's useful life.

  5. Divide the total depreciation by the useful life of the asset. This gives you the annual depreciation expense.

  6. Each year, subtract the annual depreciation expense from the book value of the asset. The book value at the beginning of the first year is the original cost. For subsequent years, the book value is the original cost minus the accumulated depreciation.

  7. Continue this process until the book value of the asset equals its scrap value.

This problem has been solved

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