Stear corp. bought a machine on january 1, 2012 for $37,500. the company follows a policy of calculating depreciation using the written-down-value method at 8% per annum. the accounting period of stear corp. is from january to december. what will be the amount of depreciation added to the accumulated depreciation account for the year 2013?

The answer would be $5,760

Explanation:

Written-down-value method (WDV) is calculated using the following formula: WDV= (Asset cost- Asset savage value)* Depreciation rate in %

at the end of 2012, Asset cost = $37,500; savage value = 0; depreciation rate= 8%

Therefore, at the end of 2012, the depreciation is calculated as follows:

WDV= 37,500* 8% = $3,000

At the end of 2013, asset cost =37,500: savage value =37500-3000= 34,500; depreciation rate= 8%

WDV = 34500 *8= $2,760

The amount of depreciation to be added to the accumulated depreciation account for the year 2013 will be the sum for the two years.

That is,  $3,000+$2,760= $5,760

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