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# 3/8/2013

## FINANCIAL MANAGEMENT (CEM115)

DEPRECIATION
FRANCIS JULIUS GABRIEL REOPTA

DEPRECIATION

Question
Supposed a year ago your business dump truck for Php3,500,000 to haul to various construction sites. If your were to sell that truck today, could the sell it for Php3,500,000? NO!!! Why? Due to wear and tear Age of equipment Possibly obsolete
Managerial Accounting for Construction Managers By ENGR. FRANCIS JULIUS GABRIEL REOPTA

## bought a materials company company

3/8/2013

DEPRECIATION

What is DEPRECIATION?
The loss of equipment or property value over time.

3 TYPES:
1. Straight Line Method 2. Sum-of-the-Years Method 3. Declining Balance Method
Managerial Accounting for Construction Managers By ENGR. FRANCIS JULIUS GABRIEL REOPTA

DEPRECIATION

## STRAIGHT LINE METHOD

assumes that an asset losses its value at a constant rate

Managerial Accounting for Construction Managers By ENGR. FRANCIS JULIUS GABRIEL REOPTA

3/8/2013

DEPRECIATION

## SUM-OF-THE-YEARS (SOY) METHOD

used to accelerate the depreciation of an asset.

Managerial Accounting for Construction Managers By ENGR. FRANCIS JULIUS GABRIEL REOPTA

DEPRECIATION

## DECLINING BALANCE METHOD

used to accelerate the depreciation of an asset.

Condition was set since this depreciation method does not produce a book value equal to the salvage value at the end of the recovery period, the book value must be FORCED to intersect the salvage value
Managerial Accounting for Construction Managers By ENGR. FRANCIS JULIUS GABRIEL REOPTA

3/8/2013

INFLATION

PROBLEM 1:
A dump truck is purchased for S110,000 and has an estimated salvage value of \$10,000 at the end of 5 year recovery period. Prepare a depreciation schedule using: A. Straight Line Method B. Sum-of-the-Years Method C. Double Declining Balance Method

Managerial Accounting for Construction Managers By ENGR. FRANCIS JULIUS GABRIEL REOPTA

DEPRECIATION

Managerial Accounting for Construction Managers By ENGR. FRANCIS JULIUS GABRIEL REOPTA