CE40 / A2

C2 March 19, 2017

IGNACIO, Camille P.
2014107334 CE-3
CO4 – CPR4
A contractor bought a crane for erecting tall buildings. It was invoiced from Japan
CIF (cost, insurance, freight) Manila at P2,500,000. Brokerage, bank, customs’
duties, permits, etc. total P1,200,000. At the end of 10 years, he expects to sell it
for P500,000. Construct a schedule of the book value at the end of each year using
the following methods: (a) Straight-Line Formula, (b) Sinking Fund Formula at 12%,
(c) Matheson Formula (d) Double Declining Method and (e) SYD Method.
Solution:
Co = P2,500,000 + P1,200,000 = P3,700,000
Cn = P500,000
n = 10
A. Straight-Line Formula:
C o−C n 3,700,000−500,000
d= = = P320,000
n 10

Book value at beginning of Depreciati Book value at end of

Year
year on year
1 P3,700,000 P320,000 P3,380,000
2 P3,380,000 P320,000 P3,060,000
3 P3,060,000 P320,000 P2,740,000
4 P2,740,000 P320,000 P2,420,000
5 P2,420,000 P320,000 P2,120,000
6 P2,120,000 P320,000 P1,780,000
7 P1,780,000 P320,000 P1,460,000
8 P1,460,000 P320,000 P1,140,000
9 P1,140,000 P320,000 P820,000
10 P820,000 P320,000 P500,000

B. Sinking Fund Formula at 12%

0.12
d = (Co – Cn) (A/F, 12%, 10) = 3,200,000 ( 1.1210 −1 )

d = P182,349.33
1.12m −1
Dm = d (F/A, 12%, m) = 182,349.93 ( 0.12 )

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 1
1.12 −1
D1 = P 182,349.33( 0.12 ) = P182,349.33

1.122−1
D2 = P 182,349.33( 0.12 ) = P386,580.58
3
1.12 −1
D3 = P 182,349.33( 0.12 ) = P615,319.58

1.12 4−1
D4 = P 182,349.33( 0.12 ) = P871,507.26

1.125 −1
D5 = P 182,349.33( 0.12 ) = P1,158,437.46

1.126 −1
D6 = P 182,349.33( 0.12 ) = P1,479,799.29

1.127 −1
D7 = P 182,349.33( 0.12 ) = P1,839,724.53
8
1.12 −1
D8 = P 182,349.33( 0.12 ) = P2,242,840.80

1.129 −1
D9 = P 182,349.33( 0.12 ) = P2,694,331.03
10
1.12 −1
D10 = P 182,349.33( 0.12 ) = P3,200,000.00

Book Value at Accrued Book Value at the Book Value

Year beginning of Depreciatio end of each year at the
year 1 n (Co – Dm) Beginning
P3,700,000.0
1 P3,700,000 P182,349.33 P3,517,650.7
0
2 P3,700,000 P386,580.58 P3,313,419.4 P3,517,650.7
3 P3,700,000 P615,319.58 P3,084,680.4 P3,313,419.4
4 P3,700,000 P871,507.26 P2,828,492.8 P3,084,680.4
P1,158,437.4
5 P3,700,000 P2,541,562.6 P2,828,492.8
6
P1,479,799.2
6 P3,700,000 P2,220,200.8 P2,541,562.6
9
P1,839,724.5
7 P3,700,000 P1,860,275.5 P2,220,200.8
3
P2,242,840.8
8 P3,700,000 P1,457,159.3 P1,860,275.5
0
P2,694,331.0
9 P3,700,000 P1,005,669.0 P1,457,159.3
3
10 P3,700,000 P3,200,000.0 P500,000 P1,005,669.0

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 0

C. Matheson Formula
Co = P3,700,000
Cn = P500,000
n = 10

K=1- √
n Cn
Co = 1- √
10 500000
3700000 = 0.1814

Book Value at Depreciation

Yea Book Value at the end of
beginning of year during year
r year (Cm - kCm)
(Cm) (kCm)
1 P3,700,000.00 P671,144.5 P3,028,855.5
2 P3,028,855.5 P549,405.3 P2,479,450.2
3 P2,479,450.2 P449,748.5 P2,029,701.7
4 P2,029,701.7 P368,168.4 P1,661,533.3
5 P1,661,533.3 P301,386.2 P1,360.147.1
6 P1,360.147.1 P246,717.6 P1,113,429.5
7 P1,113,429.5 P201,965.4 P911,464.1
8 P911,464.1 P165,330.8 P746,133.3
9 P746,133.3 P135,341.4 P610,791.9
10 P610,791.9 P110,079.18 P500,000.1

D. Double Declining Method

k = 2/N = 0.20
Book Value at
Yea Depreciation Book Value at the end of
beginning of year
r during year year
(Cm)
1 P3,700,000 P740,000.00 P2,960,000.00
2 P2,960,000.00 P592,000.00 P2,368,000.00
3 P2,368,000.00 P473,600.00 P1,894,400.00
4 P1,894,400.00 P378,880.00 P1,515,520.00
5 P1,515,520.00 P303,104.00 P1,212,416.00
6 P1,212,416.00 P242,483.20 P969,932.80
7 P969,932.80 P193,986.56 P774,946.24
8 P774,946.24 P155,189.25 P620,757.00
9 P620,757.00 P124,151.40 P496,605.59
10 P496,605.59 P99,321.12 P397,284.47

E. SYD Method
Total Years = 1 + 2 + 3 + … + 9 + 10 = 55
Co – Cn = P3,200,000

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 Yea Book Value Fact Depreciation during Book Value at the end
r at beginning or year [factor * (Co - of year (Cm - kCm)
of year Cn)]
1 P3,700,000.0 10/55 P581,818.2 P3,118,181.8
2 P3,118,181.8 9/55 P523,636.4 P2,594,545.4
3 P2,594,545.4 8/55 P465,545.5 P2,129,090.9
4 P2,129,090.9 7/55 P407,272.7 P1,721,818.2
5 P1,721,818.2 6/55 P349,090.9 P1,372,727.3
6 P1,372,727.3 5/55 P290,909.1 P1,081,818.2
7 P1,081,818.2 4/55 P232,727.3 P849,090.0
8 P849,090.0 3/55 P174,545.5 P674,545.4
9 P674,545.4 2/55 P116,363.6 P558,181.8
10 P558,181.8 1/55 P58,181.8 P500,000.0

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