# Solution: What is the annual depreciation charge and what is the book value of the machine?

The initial cost of a paint sand mill, including its installation, is P800,000. The BIR approved life of this machine is 10 years for depreciation. The estimated salvage value of the mill is P50,000 and the cost of dismantling is estimated to be P15,000.

#### Problem Statement: ME Board October 1992

The initial cost of a paint sand mill, including its installation, is P800,000. The BIR approved life of this machine is 10 years for depreciation. The estimated salvage value of the mill is P50,000 and the cost of dismantling is estimated to be P15,000. Using straight-line depreciation, what is the annual depreciation charge and what is the book value of the machine at the end of six years?

• A. P76,500.00 ; P341,000.00
• B. P75,000.00 ; P343,000.00
• C. P76,500.00 ; P340,000.00
• D. P77,000.00 ; P342,000.00

The annual depreciation charge is P76,500.00 while the book value of the machine is P341,000.00.

Solution:

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