Example 3: A machine cost 15,000 and an estimated life of 12 years with a

salvage value of 2,000. What is its book value after 8 years using straight
line method?

Sinking fund formul

Problem 1: A broadcasting corporation purchased equipment for p

70,000.00 and Paid p5,500 for freight and delivery charges to the job site.
The equipment has a normal life of 12 years with a trade-in value of
P9,000.00 against the purchase of a new equipment at the end of the life.
Determine the annual depreciation cost by sinking fund method. Assume an
interest of 5.5% compounded annually?

Problem 2: A dump truck was brought for P300,000 six years ago. It will
have a salvage value of P45,000 four years from now. It is sold now for
P120,000. What is its sunk cost if the depreciation method used is sinking
fund method @ 6%.

Problem 3: A certain machinery cost p120,000 last 15 years with a salvage

value of p25,000. Money is worth 7%. If the owner decides to sell it after
using it for 8 years, what should his price be so that he will not lose or gain
financially in the transaction? Use sinking fund method of depreciation.
Example 1: A machine cost P920,000 a
the annual cost of depreciation is 20%
Declining balance method matheson formula
using a constant percentage of the de
Example 2: The cost of a certain asset is p 45,000 its life is 12 years and
scrap value of 8,000.00. Find the annual rate of depreciation under a
constant percentage method and construct a depreciation table.

Year Book value at Depreciation Total Book value at

the beginning of during the depreciation the end of
year year at the end of year
13.0456% year
1 45000 6,032.52 6,032.52 38,967.48
2 38,967.48 5,223.82 11,256.34 33,743.66
3 33,743.66 4,523.54 15,779.88 29,220.12
4 29,220.12 3,917.13 19,697.02 25,302.98
5 25,302.98 3,392.02 23,089.03 21,910.97
6 21,910.97 2,937.30 26,026.33 18,973.67
7 18,973.67 2,543.53 28,569.86 16,430.14
8 16,430.14 2,202.56 30,772.42 14,227.58
9 14,227.58 1,907.29 32,679.71 12,320.29
10 12,320.29 1,651.61 34,331.32 10,668.68
11 10,668.68 1,430.20 35,761.52 9,238.48
12 9,238.48 1,238.47 37,0000.00 8,000.00

Example 3: A panel truck initially cost 120,000. Its resale value at the end of
5th year of the useful life is estimated at 45,000. By Means of the declining
balance method determine the depreciation charge for the 3rd year.
 Year Book value at Depreciation Total Book value at
the beginning during the depreciation at the end of
of year year the end of year year
17.8124%
1 120,000 21,374.88 21,374.88 98,625.12
2 98,625.12 17,567.50087 38,942.3809 81,057.62
3 81,057.62 14,438.30735 53380.6882 66,619.31

Double declining balance

Example 1: An equipment cost P300,000 has a salvage value of P20,000 at
the end after its 20 years of useful life. Using double declining balance
method, what will be the book value of the equipment at the end of 8
years?

Example 2: A company owns earth moving equipment that cost P 150,000.

After 9 years it will have an estimated salvage value of p 25,000. Compute
the depreciation charge for double rate declining balance method for first
two years and the book value at the end of 6 years.

Example 3: A machine has a first cost of 140,000 and a life of 8 years with a
salvage value of 10,000 at the end of its useful life. If the depreciation at the
first years amounts to 35,000, what method is used in the calculation of
depreciation?

SUM OF THE YEARS DIGIT METHOD (SYD)

Year Year in Reverse Depreciation Depreciation During

Order Factor the year
1 8 8/36 8/36 (C o−C L )
2 7 7/36 7/36(C o−C L )
3 6 6/36 6/36(C o−C L )
4 5 5/36 5/36(C o−C L )
5 4 4/36 4/36(C o−C L )
6 3 3/36 3/36(C o−C L )
7 2 2/36 2/36(C o−C L )
8 1 1/36 1/36(C o−C L )
Σ of digits=36

A corporation purchased a machine for 1,000,000. Freight and installation

charges to 3% of the purchased price. If the machine shall be depreciated
over a period of 8 years with a salvage value of 12%. Determine the
depreciation charged during the 5th year using sum of the years digit
method.

Year Year in Depreciation Depreciation During the year

Reverse Factor
Order
1 8 8/36 8/36
 Example: A dredging machine has a first cost of 650,000 and has a salvage
value of 125,000 at the end of 10 years. Determine its book value of the end
of 5th year using the sum of the years digit method.

Working hours method

Example: A construction company purchased an equipment for P800,000 on

Jan 15, 2009. Its estimated useful life is 10 years with a scrap value of
P25,000, production of 1,000,000 units and working hours of 120,000. The
construction company uses the equipment for 7,800 hours in 2009, and
8,000 hours in 2010. The equipment produces 85,000 units in 2009 and
65,000 units in 2010. Calculate the depreciation for 2009 and 2010 using
working hours method.

Output Method

Example: A construction company purchased an equipment for P800,000 on

Jan 15, 2009. Its estimated useful life is 10 years with a scrap value of
P25,000, production of 1,000,000 units and working hours of 120,000. The
construction company uses the equipment for 7,800 hours in 2009, and
8,000 hours in 2010. The equipment produces 85,000 units in 2009 and

65,000 units in 2010. Calculate the depreciation for 2009 and 2010 using
output method.