DEPRECIATION (ENGR.

CALAQUE, DARIO JR)

UNIT PRODUCTION METHOD
A Xerox machine costing ₱75,000 with salvage value of ₱10,000 at the end of its life can print
3,000,000 sheets in its entire life. If it has already printed 500,000 sheets, determine the total
depreciation of the Xerox machine at that time.

Conventional Solution:
𝐴𝑚𝑜𝑢𝑛𝑡
Formula:
₱75,000 By Ratio and Proportion
Dr Dn
𝐷𝑟 =
𝐷𝑛 = 75000 − 10,000 r n
𝐵𝑉𝑟
Dr 75,000 − 10,000
=
₱10,000 500,000 3,000,000
𝐃𝐫 = ₱𝟏𝟎, 𝟖𝟑𝟑. 𝟑𝟑
𝑛𝑜. 𝑜𝑓 𝑠ℎ𝑒𝑒𝑡𝑠
0 500,000 3,000,000

WORKING HOURS METHOD

A machine costing ₱3,000,000 has a salvage value of ₱0.1M at the end of its useful life, 20
years. It can be used for 5,000 hours in its entire life. Find the accumulated depreciation after
using it for 1,000 hours.

Conventional Solution:
𝐴𝑚𝑜𝑢𝑛𝑡
Formula:
₱3M By Ratio and Proportion
Dr Dn
𝐷𝑟 =
𝐷𝑛 = 3𝑀 − 0.1𝑀 r n
𝐵𝑉𝑟
Dr 3 − 0.1
=
₱0.1M 1000 5000
𝐃𝐫 = ₱𝟎. 𝟓𝟖𝐌
𝑛𝑜. 𝑜𝑓 ℎ𝑟𝑠
0 1,000 5,000
STRAIGHT LINE METHOD
A tax and duty free importation of a 30hp sand mill (for paint manufacturing) cost ₱360,000.
CIP Manila Bank charges, arrester and brokerage cost ₱5000. Foundation and installation
cost were ₱25,000. Other incidental expenses amounted to ₱20,000. Salvage value of the
mill is estimated to be ₱60,000 after 20 years. Determine the appraisal value of the mill using
straight line method of depreciation at the end of 10 years.

Conventional Solution:
𝐴𝑚𝑜𝑢𝑛𝑡
Formula:
₱75,000 By Ratio and Proportion
Dr Dn
𝐷𝑟 =
𝐷𝑛 = 75000 − 10,000 r n
𝐵𝑉𝑟
Dr 75,000 − 10,000
=
₱10,000 500,000 3,000,000
𝐃𝐫 = ₱𝟏𝟎, 𝟖𝟑𝟑. 𝟑𝟑
𝑛𝑜. 𝑜𝑓 𝑠ℎ𝑒𝑒𝑡𝑠
0 500,000 3,000,000

SUM OF YEARS DIGIT METHOD

A machine is purchase for ₱100,000 with an estimated useful life of 10years, after which it
will be sold for ₱2000. Find the book value at the end of the third year using sum of year’s
digit method (SYDM).

Conventional Solution: Using Graphical Technique

𝐴𝑚𝑜𝑢𝑛𝑡

𝐹𝐶 𝑑1
𝑑2 𝐷3
𝐷𝑛 = 𝐹𝐶 − 𝑆𝑉

𝑑3

𝐵𝑉3
𝑆𝑉

0 3 10 𝑛𝑜. 𝑜𝑓 𝑦𝑟𝑠
𝑛−𝑟+1
𝑑𝑟 = 𝐷
1 + 2 + 3 + ⋯+ 𝑛 𝑛
 10 − 3 + 1
𝑑3 = (100,000 − 20000) = 11636.36
1 + 2 + 3 + ⋯ + 10
10 − 2 + 1
𝑑2 = (100,000 − 20000) = 13090.90909
1 + 2 + 3 + ⋯ + 10
10 − 1 + 1
𝑑1 = (100,000 − 20000) = 14545.45
1 + 2 + 3 + ⋯ + 10
𝐵𝑉3 = 𝐹𝐶 − 𝑑1 − 𝑑2 − 𝑑3
𝐵𝑉3 = 100,000 − 11636.36 − 13090.90909 − 14545.45

𝑩𝑽𝟑 =₱60,727.27

DECLINING BALANCE METHOD

A motor that cost ₱100,000 has an estimated life of 10 years and can be sold at ₱20,000 at
the end of 10 years. Compute the depreciation charge and book value at the end of 6 years
using declining balance method.

Conventional Solution:
𝐴𝑚𝑜𝑢𝑛𝑡

𝐹𝐶 𝑑1
𝐷𝑛 = 𝐹𝐶 − 𝑆𝑉

𝑑2
𝑑3 𝐷6

𝐵𝑉6
𝑆𝑉

0 6 10 𝑛𝑜. 𝑜𝑓 𝑦𝑟𝑠

𝑟
𝑆𝑉 𝑛
𝐵𝑉𝑟 = [ ] (𝐹𝐶)
𝐹𝐶
6
20000 10
𝐵𝑉6 = [ ] (100000)
100000
𝑩𝑽𝟔 = 𝟑𝟖𝟎𝟕𝟑. 𝟎𝟖(𝐚𝐧𝐬𝐰𝐞𝐫)
5
20000 10
𝐵𝑉5 = [ ] (100000)
100000
𝐵𝑉5 = 44721.35955
𝐷6 = 𝐹𝐶 − 𝐵𝑉6 = 100 000 − 38073.08 = 61926.92
𝐷5 = 𝐹𝐶 − 𝐵𝑉5 = 100 000 − 44721.35955 = 55278.64045
𝑑6 = 𝐷6−1 𝐷6 = 55278.64045 − 61926.92 = −6648.28 (Neglect sign)
d6 = 6648.28 (answer)