solved question of sinking fund
Answers
Explanation:
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Answer:
Sinking fund method is used when the cost of replacement of an asset is too large. Depreciation is charged every year to the profit and loss A/c. But, it may sometimes happen that the amount is not readily available at the time of purchase of the new asset. Thus, the sinking fund method is used.
Calculate the sinking fund depreciation allowance for a company-owned executive car having a cost basis of $60,000. The company will keep it for 3 years, and it can be sold at $25,000 at that time. Interest is 10 percent.
a. Determine the sinking fund depreciation for each of the 3 year
Step 1 of 4
Under Sinking fund method of depreciating an asset, definite amount of money is set aside for investing annually so that when the useful life of asset is over it can be replaced by using the principal amount invested and interest earned on it.