1.) An asset is purchased for Php 9,000.

Its estimated life is 10 years, after which it will be sold

for Php 1,000,000. Find the book value during the third year if the sum-of-the years digit (SOYD)
depreciation is used.
Solution:
SOYD = 1+2+3+4+5+6+7+8+9+10
SOYD = 55

Dep1 = ( 9,000−1,000 )( 1055 )=Php 1,454.54

9
Dep = ( 9,000−1,000 ) ( )=Php 1,309.10
2
55

8
Dep = ( 9,000−1,000 ) ( )=Php 1,163.63
3
55

Dept = 1,454.54+1,309.10+1,163.63

Dept = Php 3,972.28

Book Value = FC – Dept

Book Value = 9,000−3,972.28

Book Value = Php5,072.72

2.) An asset is purchased for Php 500,000. The salvage value in 25 years is P100,000. What are
the depreciation in the first three years using straight line method?
Solution:
The depreciation for the first 3 years are:
FC −SV
D=
n
500,000−100,000
D=
25
D=Php 16,000.00
Note: D is the depreciation every years until 25 years.
3.) A machine has an initial cost of Php 50,000 and a salvage value of Php 10,000 after 10 years.
What is the book value after five years using straight line depreciation?
Solution:
FC −SV
D=
n
50,000−10,000
D=
10
D=Php 4,000.00
 Solving for the book value after 5 years:
BV5 = FC – D5

BV5 = 50,000−5 (4,000)

BV5 = Php 30,000.00

4.) An asset is purchased for Php 9,000. Its estimated life is 10 years after which it will be sold
for Php 1,000. Find the book value during the first year if sum-of-the-years digit (SOYD)
depreciation is used.
Solution:

SOYD=( n+12 ) ( n )
10+1
SOYD=(
2 )
(10 )=55

10
Dep3 = ( FC−SV )
SOYD
10
Dep1 = ( 9,000−1,000)
55
Dep1 = Php1,454.54
BV1 = FC – Dep1

BV1 = 9,000−1,454.54

BV1 = Php7,545.00

5.) A company purchases an asset for Php10,000 and plans to keep it for 20 years. If the salvage
value is zero at the end of 20th year, what is the depreciation in the third year? Use sum-of-the-
years-digit depreciation.
Solution:

SOYD= ( n+12 )(n)

20
SOYD= (1+20 )=210
2
18
Dep3 = (FC −SV )
SOYD
18
Dep3 = ( 10,000−0 )
210
Dep3 = Php 857.14
6.) A factory equipment has an initial cost of Php 200,000. Its salvage value after 10 years is Php
20,000. As a percentage of the initial cost, what is the straight line depreciation rate of the
equipment?
Solution:
 FC −SV
D=
n
200,000−20,000
D= =Php18,000
10
D
Depreciaton rate=
FC
18,000
Depreciationrate=
200,000
Depreciationrate=9 %

7.) An asset is purchased for Php 9,000.00. Its estimated life is 10 years, after which it will be
sold for Php 1,000.00. Find the book value during the second year if sum-of-the-years digit
depreciation is used.
Solution:

SOYD=( n+1n ) n
10+1
SOYD=(
2 )
10=55

10
Dep1 = ( 9,000−1,000 )=Php 1,454.54
55
9
Dep2 = (9,000 - 1,000) = Php 1,309.10
55
Dept = 1,454.54+1,309.10=Php2,763.64
Book value after 2 years is:
BV2 = FC – Dept
BV2 = 9,000-2,763.64 = 6,236.35
8.) An asset is purchased for Php 500,000.00. The salvage value in 25 years is Php 100,000.00.
What is the depreciation using straight line method?
Solution:
FC −SV
D=
n
500,000−100,000
D= = Php 16,000.00
25
9.) An asset is purchased for Php 500,000.00. The salvage value in 25 years is Php 100,000.00.
What is the depreciation in the 3rd year using Sum of the years digit method?
Solution:
 SOYD=( n+1n ) n
25+1
SOYD=(
2 )
25=325

23
Dep3 = ( 500,000−100,000 )=Php28,307.69
325
10.) Ozok Systems International is considering buying equipment for Php 50,0000.00. This
equipment will have a salvage value of Php 8,000.00 after a useful life of 14 years. Using sum-of-
the-years (SOYD) method of depreciation, compute the depreciation change on the equipment for
the third year of its useful life.
Solution:
n
SOYD= ( a+ L )
2
14
SOYD= ( 1+ 14 ) =105
2
Dep3 = depreciation change in 3rd year
12
Dep3 = ( 50,000−8,0000 )=Php 4,800.00
105

11.) A large profitable corporation has purchased a jet plane for use by its executives. The cost of
the plane is P76 million. It has a useful life of 5 years. The estimated resale value at the end of
five years is six million pesos. Using the sum-of-the-years-digit method of depreciation, what is
the book value of the jet plane at the end of 3 years?
Solution:

SOYD= ( n+1n ) n
5+1
SOYD=(
2 )
5=15

5
Dep ¿ ( ) ( 76−6 )=23.33 M
1
15

4
Dep ¿ ( ) ( 76−6 )=18.66 M
2
15

3
Dep ¿ ( ) ( 76−6 )=14 M
3
15
Dt ¿ 23.33+18.67+14=Php 56 M

BV3 = FC – Dt
BV3 = 76-56 = Php 20M
12.) A large profitable corporation has purchased a jet plane for use by its executives. The cost of
the plane is P76 million. It has a useful life of 5 years. The estimated resale value at the end of
five years is six million pesos. Using straight-line depreciation, what is the book value of the jet
plane at the end of 3 years?
Solution:
FC −SV
D=
n
76−6
D= =P 14 M
5
Solving for the book value after 3 years:
Dt = 3(14) = 42M
BV3 = FC – Dt
BV3 = 76-42 = Php 34M
13.) A company purchases an asset at P10,000.00 and plans to keep it for 20 years. If the salvage
value is zero at the end of 20th year, what is the depreciation charge in the third year? Using sum
of the years digit method of depreciation.
Solution:

SOYD=( n+1n ) n
20+1
SOYD=(
2 )
20=210

The depreciation charge for the 3rd year:

18
Dep3 = ( 10,000−0 )=Php 857.14
210

14.) A lathe has an initial cost of Php 20,000.00 and an estimated life of 15 years, the salvage
value of the lathe is Php 2000.00. If a fixed-percentage method of depreciation is used, what
percentage of original book value of the lathe is depreciated each year?
Solution:
20,000−2000
D= =Php1,200.00
15
D
Depreciaiton Rate=
FC
1,200
Depreciation Rate= =6 %
20,000
15.) Company A purchases Php 200,000.00 of equipment in year zero. It decides to use straight-
line depreciation over the expected 20 years life of the equipment. The interest rate is 14%. If its
average tax rate is 40%, what is the present worth of the depreciation tax held?
Solution:
 FC −SV
D=
n
200,000−0
D= =Php10,000.00
20
R = depreciation tax held annually
R = 0.40(10,000) = Php 4,000.00
The present worth of depreciation tax held for 20 years is:
P=4,000 ¿
16.) A machine has an initial cost of Php 50,000.00 and a salvage value of Php 10,000.00 after 10
years. What is the straight-line method of depreciation rate as a percentage of the initial cost?
Solution:
FC −SV
Annual depreciation=
n
50,000−10,000
Annual depreciation= =Php 4,000.00
10
4,000
Depreciationrate= =8 %
50,000
17.) A machine shop purchased 10 years ago a milling machine for Php 60,000.00. A straight-line
depreciation reserve had been provided on a 20 years life of the machine. The owner of the
machine shop desires to replace the old milling machine of a modern unit with many advantages
costing Php100,000.00. It can sell the old unit for Php 20,000.00. How much new capital will be
required for the new purchase?
Solution:
60,000−0
D= =Php 3,000.00
20
Amount reserve after 10 years = 10(3,000) = Php 30,000.00
New capital required = 100,000 – (30,000 + 20,000) = Php 50,000.00
18.) A tax and duty free importation of a 30 hp sand mill (for paint manufacturing) cost Php
360,000.00, CIF Manila. Bank charges, arrastre and brokerage cost Php 5,000.00. Foundation and
installation costs were Php 25,000.00 Other incidental expenses amounted to Php 20,000.00.
Salvage value of the mill is estimated to be Php 60,000.00 after 20 years. Find the appraisal value
of the mill, using straight-line depreciation, at the end of 10 years.
Solution:
FC =360,000+5,000+25,000+20,000=Php 410,000.00
410,000−60,000
D= =Php 17,000.00
20
BV10 = 410,000 – 10(17,000) = Php 235,000.00
19.) An evaporator cost Php 45,000.00 5 years ago with an estimated life of 8 years. Its salvage
value is Php 2,000.00. Find the book value if it can sell the old unit for Php 20,000.00 with 12%
interest rate.
Solution:

( FC −SV ) i
D=
(1+i)n−1
 (45,000−2,500)(0.12)
D= =Php 3,455.37
(1+0.12)8−1

(1+i)n −1
D5 = D
[ i ]
(1.12)5−1
D5 ¿ 3,455.37
[ 0.12 ]=Php 21,951.44

BV5 = FC – D5 = 45,000-21,951.44
BV5 = Php 23,048.56
20.) An air-conditioning unit was bought Php 30,000.00 six years ago. It will have a salvage
value of Php 3,000.00 four years from now. It is sold for Php 10,000.00. Using straight-line
method, determine the sunk cost.
Solution:
FC −SV
D=
n
30,000−3,000
D= =2,700
10
Solving for the present book value:
BV6 = FC – D6 = 30,000 – 6(2,700)
BV6 = Php 13,800.00
Sunk cost = book value-actual resale value
Sunk cost = 13,800 – 10,000 = Php 3,800.00

21.) A unit of welding machine cost Php 45,000.00 with an estimated life of 5 years. Its salvage
value is Php 2,500.00. Find its depreciation rate by sinking fund method with 8.5% interest.
Solution:

( FC −SV ) i
D=
( 1+i )n−1
(45,000−2,500)(0.085)
D=
(1+0.085)5−1
D=Php 7,172.54
22.) The annual depreciation of Php 20,000 has been reserve for a machine using a straight-line
for 8 years. If the first cost is Php 200,000.00, determine the salvage value of the machine.
Solution:
FC −SV
D=
n
200,000−SV
20,000=
8
SV =Php 40,000.00
23.) A machine has a first cost of Php 80,000 and salvage value of Php 10,000.00 for 10 years.
Using straight-line, determine the book value after 6 years.
Solution:
FC −SV
D=
n
80,000−10,000
D= =Php7,000.00
10
D6 = 6D = 6(7,000)
D6 = 42,000
Bv6 = FC – D6 = 80,000 – 42,000
BV6 = Php 38,000.00
24.) An equipment costs Php 10,000.00 with a salvage value of Php 500.00 at the end of 10 years.
Calculate the annual depreciation by sinking fund method with 40% interest.
Solution:

( FC −SV ) i
D=
( 1+i )n−1
(10,000−500)(0.40)
D=
(1+ 0.40)10−1
D=Php 136.00
25.) A certain machinery costs Php 50,000.00, last 12 years with a salvage value of Php5,000.00.
Money is worth 5%. If the owner decides to sell it after using it for 5 years, what should his price
be so that he will not lose or gain financially in the transaction?
Solution:

( FC −SV ) i
D=
( 1+i )n−1
( 50,000−5,000 )( 0.05 )
D=
( 1+ 0.05 )12−1
D=Php 2,827.14

D [ ( 1+i )m−1 ]
D5 = =2,827.14 ¿ ¿
i
D5 = 15,621.75
BV5 = FC – D5 = 50,000-15,621.75
BV5 = Php 34,378.25