document.write( "<A HREF=/cgi-bin/jump-to-question.mpl?question=1181849>Question 1181849</A>: <I><SPAN STYLE=\"word-break: break-all;\"> A consortium of international telecommunication companies contracted for the purchase and<BR>\n" );
document.write( "installation of fiber optic cable linking Manila City and Cebu City at total cost of P980 million. This amount<BR>\n" );
document.write( "includes freight and installation charges estimated at 12% of the above total contract price. If the cable<BR>\n" );
document.write( "shall be depreciated over a period of 15 years with 1% salvage value and money is worth 6% per annum,<BR>\n" );
document.write( "what is the depreciation charge during 13 th year, depreciation chargers after 10 years and book value<BR>\n" );
document.write( "after 13 years using straight line method. </SPAN>\n" );
document.write( "</I><HR><TABLE width=100%><TR><TD><B><A HREF=http://www.algebra.com/>Algebra.Com's</A> Answer #849961 by </B><A HREF=/tutors/aboutme.mpl?userid=CPhill><B>CPhill(1959)</B></A><img src=\"/images/stars/stars-12.gif\" alt=\"\" >&nbsp;<A HREF=/tutors/aboutme.mpl?userid=CPhill><IMG SRC=http://www.algebra.com/images/aboutme-small.gif BORDER=0 alt=\"About Me\" VALIGN=MIDDLE></A>&nbsp;<IMG SRC=http://www.algebra.com/cgi-bin/show-face.mpl?user=CPhill><BR>You can <A HREF=\"/cgi-bin/embed-solution.mpl?show=1&solution=849961\">put this solution on YOUR website!</A><BR><SPAN STYLE=\"word-break: break-all;\"> Here's the breakdown of the depreciation calculations:\r<BR>\n" );
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document.write( "1. **Calculate the cost of the cable (excluding freight and installation):**\r<BR>\n" );
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document.write( "*   Let 'C' be the cost of the cable.<BR>\n" );
document.write( "*   The total contract price (P980 million) includes freight and installation, which is 12% of the total contract price.<BR>\n" );
document.write( "*   So, 1.12C = P980,000,000<BR>\n" );
document.write( "*   C = P980,000,000 / 1.12 = P875,000,000\r<BR>\n" );
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document.write( "2. **Calculate the annual depreciation:**\r<BR>\n" );
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document.write( "*   Depreciable amount = Original cost - Salvage value<BR>\n" );
document.write( "*   Depreciable amount = P875,000,000 - (0.01 * P875,000,000) = P875,000,000 - P8,750,000 = P866,250,000<BR>\n" );
document.write( "*   Annual depreciation = Depreciable amount / Useful life<BR>\n" );
document.write( "*   Annual depreciation = P866,250,000 / 15 years = P57,750,000\r<BR>\n" );
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document.write( "3. **Depreciation charge during the 13th year:**\r<BR>\n" );
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document.write( "*   With the straight-line method, the depreciation charge is the *same* each year.<BR>\n" );
document.write( "*   Therefore, the depreciation charge during the 13th year is P57,750,000.\r<BR>\n" );
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document.write( "4. **Depreciation charges after 10 years:**\r<BR>\n" );
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document.write( "*   Total depreciation after 10 years = Annual depreciation * 10 years<BR>\n" );
document.write( "*   Total depreciation after 10 years = P57,750,000 * 10 = P577,500,000\r<BR>\n" );
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document.write( "5. **Book value after 13 years:**\r<BR>\n" );
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document.write( "*   Total depreciation after 13 years = Annual depreciation * 13 years<BR>\n" );
document.write( "*   Total depreciation after 13 years = P57,750,000 * 13 = P750,750,000<BR>\n" );
document.write( "*   Book value after 13 years = Original cost - Total depreciation after 13 years<BR>\n" );
document.write( "*   Book value after 13 years = P875,000,000 - P750,750,000 = P124,250,000\r<BR>\n" );
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document.write( "**Summary:**\r<BR>\n" );
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document.write( "*   Depreciation charge during the 13th year: P57,750,000<BR>\n" );
document.write( "*   Depreciation charges after 10 years: P577,500,000<BR>\n" );
document.write( "*   Book value after 13 years: P124,250,000<BR>\n" );
document.write( " </SPAN>\n" );
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