Depreciation

Methods
by Amanda Luvy Isabel B. Dalmero
Table of Contents
Straight Double
Line declining Declining
Method balance Balance

150% Units of
Sum of the
Declining Production
Years Digit
Balance Depreciation
Situation
Cost of equipment P 17,000
Estimated residual value P 2,000
Estimated useful life 5 years
Estimated units of output 100,000 miles
 Straight Line
Method

Formula:
Depreciation Expense = (Cost - Salvage Value) / Estimated Useful Life
Straight Line
Method
a method of calculating periodic
depreciation that involves
subtraction of the scrap value from
the cost of a depreciable asset and
division of the resultant figure by
the anticipated number of periods
of useful life of the asset
 Depreciation Expense = Cost - Salvage Value
Estimated Useful Life

= 17,000 - 2,000 = 15,000 = 3,000

5 5

Depreciation Accumulated Net Carrying

Year Cost
Expense Depreciation Value

1 ₱17,000 ₱3,000 ₱3,000 ₱14,000

2 ₱17,000 ₱3,000 ₱6,000 ₱11,000

a. depreciation expense to be recorded in the first year
Answer: ₱3,000

b.the accumulated depreciation (at year 2)

Answer: ₱6,000

c. book value of the asset in the 2nd year

Answer: ₱11,000
Declining Balance

Formula:
Straight Line Rate = 100% / Estimated Useful Life
Fixed Rate = Straight Line Rate x Factor of Decline
Declining
Balance
The declining balance method is an
accelerated depreciation system of
recording larger depreciation
expenses during the earlier years
of an asset’s useful life and
recording smaller depreciation
expenses during the asset's later
years.
 Straight Line Rate = 100%
Estimated Useful Life

= 100% = 20%
5
Fixed Rate = 20% x 1
= 20%

Accumulate
Net
Depreciation d
Year Cost Fixed Rate Carrying
Expense Depreciatio
Value
n

1 ₱17,000 20% ₱3,400 ₱3,400 ₱13,600

2 ₱13,600 20% ₱2,720 ₱6,120 ₱10,880

a. depreciation expense to be recorded in the first year
Answer: ₱3,400

b.the accumulated depreciation (at year 2)

Answer: ₱6,120

c. book value of the asset in the 2nd year

Answer: ₱10,880
Double Declining
Balance
Formula:
Straight Line Rate = 100% / Estimated Useful Life
Fixed Rate = Straight Line Rate x Factor of Decline
Double Declining
Balance
The double declining balance (DDB)
depreciation method is an
approach to accounting that
involves depreciating certain assets
at twice the rate outlined under
straight-line depreciation. This
results in depreciation being the
highest in the first year of
ownership and declining over time.
 Straight Line Rate = 100%
Estimated Useful Life

= 100% = 20%
5
Fixed Rate = 20% x 2
= 40%

Accumulate
Net
Depreciation d
Year Cost Fixed Rate Carrying
Expense Depreciatio
Value
n

1 ₱17,000 40% ₱6,800 ₱6,800 ₱10,200

2 ₱10,200 40% ₱4,080 ₱10,880 ₱6,120

a. depreciation expense to be recorded in the first year
Answer: ₱6,800

b. the accumulated depreciation (at year 2)

Answer: ₱10,880

c. book value of the asset in the 2nd year

Answer: ₱6,120
150% Declining
Balance
Formula:
Straight Line Rate = 100% / Estimated Useful Life
Fixed Rate = Straight Line Rate x Factor of Decline
 Straight Line Rate = 100%
Estimated Useful Life

= 100% = 20%
5
Fixed Rate = 20% x 1.5
= 30%

Net
Depreciation Accumulated
Year Cost Fixed Rate Carrying
Expense Depreciation
Value

1 ₱17,000 30% ₱5,100 ₱5,100 ₱11,900

2 ₱11,900 30% ₱3,570 ₱8,670 ₱8,330

a. depreciation expense to be recorded in the first year
Answer: ₱5,100

b. the accumulated depreciation (at year 2)

Answer: ₱8,670

c. book value of the asset in the 2nd year

Answer: ₱8,330
Sum of the Years
Digit

Formula:
Depreciation Expense = (Cost - Salvage Value) x Factor
Sum of the Years
Digit
This method takes the asset's
expected life and adds together the
digits for each year; so if the asset
was expected to last for five years,
the sum of the years' digits would
be obtained by adding: 5 + 4 + 3 + 2
+ 1 to get a total of 15.
 SYD = (Estimated Useful Life/2)(Estimated Useful Lfe +1)
= (5/2)(5+1)
=(2.5) (6)
= 15

Depreciation Expense = (cost - salvage value) x factor

Net
Depreciable Depreciable Depreciation Accumulated
Year Cost Cost Factor Expense Depreciation
Carrying
Value

1 ₱17,000 15,000 0.33 ₱5,000 ₱5,000 ₱12,000

2 ₱17,000 15,000 0.27 ₱4,000 ₱9,000 ₱8,000

a. depreciation expense to be recorded in the first year
Answer: ₱5,000

b. the accumulated depreciation (at year 2)

Answer: ₱9,000

c. book value of the asset in the 2nd year

Answer: ₱8,000
 Unit of Production
Depreciation

Formula:
Cost of Depreciation per miles = (cost - salvage value) / estimated
total units
Unit of
Production
Depreciation
The unit of production method is a
method of calculating the
depreciation of the value of an
asset over time. It becomes useful
when an asset's value is more
closely related to the number of
units it produces rather than the
number of years it is in use.
CDM = (cost - salvage value)/ estimated
total units

= 17,000 - 2000 / 100,000

=15,000 / 100,000
= 0.15