Straight Line Method

1. What is the book value of electronic test equipment after 8 years of

use if it depreciates from its original value of P 120,000.00 to its salvage
value of 13% in 12 years? Use straight-line method.

2. The initial cost of paint sand mill, including its installation is

P800 000.00. The BIR approved life of this machine is 10 years for
depreciation. The estimated salvage value of the mill is P 50,000.00 and
the cost of dismantling is estimated to be P 15,000.00. Using straight line
depreciation, what is the annual depreciation charge and what is the book
value of the machine at the end of six years?
Sinking Fund Method

1. A factory is constructed at a 1st cost of P 8,000,000 and with an

estimated salvage value of P 200,000 at the end of 25 years. Find its
appraised value to the nearest 100 at the end of 10 years by using sinking
fund method.

2. A machine that costs P 75,000 five years ago now cost P 45,864.31,
when 7% interest is applied using the sinking fund formula. Determine the
salvage value of the machine for an estimated useful life of 10 years.
Declining Balance Method

1. A radio service panel truck initially costs P 56,000. If resale value at

the end of the fifth year is estimated at P 15,000. By means of the
Declining Balance Method, determine the yearly depreciation charge for
the first and second years.

2. An engineer bought and equipment for P 800,000. Other expenses,

including installation, amounted to P 50,000. At the end of its estimated
useful life of 10 years, the salvage value will be 10% of the first cost.
Using the constant percentage method of depreciation, what is the book
value after 5 years?
Double Declining Balance Method.

1. An earth moving equipment that cost P 90,000 will have an estimated

salvage value of P 18,000 at the end of 8 years. Using double-declining
balance method, compute the book value and total depreciation at the end
of 5th year.

2. Cost of machine = P 1,400,000; Useful life = 8 years; Salvage

th
value = P 10,000; Determine the 4 year depreciation using double
declining method.
Sum of the Years Digit Method

1. A company purchase an asset for P 10,000,000 and plans to keep it for

20 years. If the salvage value is zero at the end of the 20 th year.

(a) What is the depreciation in the third year?

(b) What is the total depreciation at the end of 14 years?
(c) What is the book value of the asset at the end of 8 years?
Use sum of the years digits depreciation.

2. A certain equipment costs P 7,000 has an economic life of “n” years and
a salvage value of P 350 at the end of “n” years. If the book value at the
end of 4 years is equal to P 2,197.22, compute the economic life of the
equipment using the SOYD Method.