DEPRECIATION

9TH MEETING
DEPRECIATION
is the decrease in the value
o f a n a s s e t o v e r ti m e o r a s i t
is used. The main reason for
d e v e l o p i n g t h e d e p r e c i a ti o n
concept was to allow a fairly
accurate report to the
business owner of the value
of an asset at any given point
i n ti m e

2
CALCULATION BASIS OF
DEPRECIATION
H O W T O C A L C U L AT E

The initial value is the initial price of an asset which consists of

the purchase price, shipping costs, installation costs, and other
costs associated with preparing the asset until the asset is
ready for use. The residual value is the final value of an asset at
the end of its life. The residual value is usually a deduction
from the sale value of an asset by the costs required to remove
or transfer the asset.
The book value of an asset is the investment value of the asset
less the total depreciation value at that time. Depreciation or
depreciation is charged annually and the book value of the
asset is usually calculated at the end of each year. The sale
value of an asset usually refers to the amount of money that
can be received when the asset is sold on the free market at its
last life

3
R E P O RT S TO BUSINESS OWNERS ABOUT THEIR
P R O F I TA B I L I T Y, B A S E D S O L E LY O N C A S H F L O W, C A N
BE MISLEADING. FOR EXAMPLE, A BUSINESS WITH
A N N U A L R E V E N U E S T H AT E X C E E D A N N U A L E X P E N S E S
O F, S AY, $ 1 M I L L I O N . H O W E V E R , T H I S Y E A R T H E
C O M PA N Y S P E N T $ 1 . 5 M I L L I O N O N E Q U I P M E N T T H AT
W I L L B E U S E D F O R 5 Y E A R S . I F N O D E P R E C I AT I O N
C A L C U L AT I O N , T H E C A S H F L O W C A L C U L AT I O N W I L L
S H O W T H AT T H E C O M PA N Y L O S T $ 0 . 5 M I L L I O N I N
YEAR 0 OR IN OTHER WORDS ALL EQUIPMENT COSTS
A R E E X P E N S E D I N 1 Y E A R S O T H I S I S N O T C O R R E C T.

4
ON THE OTHER HAND, IF THE
C O M PA N Y S P R E A D S T H E I N V E S T M E N T
OF $1.5 MILLION OVER THE 5 YEARS
PERIOD OF ITS USE, THEN THE
C O M PA N Y ' S B U S I N E S S W I L L B E
A C C U R AT E LY D E S C R I B E D A S P R O F I T
OVER THE ENTIRE PERIOD. TO SPREAD
THE INVESTMENT COSTS OVER THE
USEFUL LIFE OF THE EQUIPMENT
P U R C H A S E D , T H E R E A R E VA R I O U S
A P P R O A C H E S T H AT C A N B E U S E D .

5
D E P R E C I AT I O N C O S T S A R E A C O N V E N I E N T M E C H A N I S M
F O R R E C O V E R I N G I N V E S T E D C A P I TA L . T H U S , W H E N T H E
T I M E C O M E S T O R E P L A C E T H E A S S E T, F U N D S W I L L B E
AVA I L A B L E T O D O S O ( U N L E S S T H E P R I C E H A S
INCREASED OVER THE LIFE OF THE ASSET). ALSO, AS
M E N T I O N E D , T R E AT I N G D E P R E C I AT I O N E X P E N S E A S A N
E X P E N S E A L L O W S T H E C O M PA N Y T O I N C L U D E T H AT
E X P E N S E I N P R O D U C T I O N C O S T S A N D E N S U R E T H AT T H E
PRICE IS SUFFICIENT TO RECOVER THE INVESTED
C A P I TA L .
 •The initial value is the initial price of an
asset which consists of the purchase
BASIS FOR price, shipping costs, installation fees,
and other costs associated with
CALCULATI preparing the asset until the asset is
NG ready for use. The salvage value is the
final value of an asset at the end of its
DEPRECIATI life. The salvage value is usually the
ON reduction of the sale value of an asset
with the costs required to remove or
move the asset.

7
 The book value of the asset is the
investment value of the asset minus the
BASIS FOR total depreciation value at that time.
CALCULATI Depreciation or depreciation is charged
annualy and the book value of the asset
NG is usually calculated at the end of each
DEPRECIATI year. The selling value of an asset
ON usually refers to the amount of money
that can be received when the asset is
sold on the free market at its last life.

8
BASIC CALCULATION THAT MUST
BE REMEMBER

9
SIMPLE INTEREST
CALCULATION
Future Value =

i = interest rate in a certain period

n = number of periods (can be in years, months and so on) FUTURE
F = Future value or future value of principal value
P = Present value or principal or present value VALUE

𝑛
𝐹 =𝑃 ( 1+𝑖 )
PRESENT
VALUE
N

P=F(PVIF)
 FUTURE
A = Annuity
I = Interest rate
VALUE
ANUITY

( )
n
( 1+i ) −1
F= A = A { FVIF A k ,n }
i
 HOW TO
FIND
ANNUITYIF THE FUTURE VALUE OF THE ANNUITY IS $
WHEN THE3,121.60 FOR 3 YEARS WITH 4% INTEREST,
FUTURETHE ANNUAL VALUE OF THE ANNUITY IS:
VALUE IS
KNOWN .
HOW TO FIND PRESENT VALUE IF ANNUITY IS
KNOWN

THERE IS AN EQUAL SET OF

PAYMENTS OF $ 1,000 OVER
3 PERIODS WITH INTEREST
OF 4% AT THE END OF EACH P.
PERIOD. THE PRESENT
VALUE OF THE ANNUITY IS
 IF THE PRESENT VALUE OF AN
ANNUITY IS $ 2,775.1, THE
. VALUE OF THE ANNUITY FOR 3
YEARS WITH AN INTEREST RATE
HOW TO FIND OF 4 PERCENT PER YEAR IS

ANNUITY IF P
IS KNOWN
PRESENT VALUE OF ANNUITY WITH
GRADIENT

THERE IS A PAYMENT AT THE END

OF EACH YEAR WHERE IN THE FIRST
YEAR IT IS 100,000 RUPIAH. THIS
PAYMENT IS INCREASED BY 10
THOUSAND RUPIAH PER YEAR WITH
AN INTEREST OF 10% PA FOR 5
YEARS. CALCULATE THE PRESENT
VALUE OF THIS VALUE
 STRAIGHT-LINE
DEPRECIATION
METHOD
L E T ’ S D I V E I N

BV t=P −t ( P−S
N )
W H AT

Dt = Amount of depreciation or depreciation in year t

P = Initial cost of asset or initial investment of asset
BVt = Book value of assets in year t
S = Residual value of assets
N = Lifetime (age) of assets stated in years
t = Year

18
 SUM OF YEAR DIGIT
L E T ’ S D I V E I N
Remaining assetlife
Dt = ( InitialCost −residualvalue )
SOYD
N − t +1
Dt = ( P − S)
SOYD
N ( N +1 )
S OYD=1+2+3+ 4+5+6 +…+ N =
2

BV =P −
t ( N −
t
2
+ 0,5 )(P−S)
t
SOYD
VA R I A B L E

Dt = Amount of depreciation or depreciation in year t

P = Initial cost of asset or initial investment of asset
BVt = Book value of assets in year t
S = Residual value of assets
N = Lifetime (age) of assets stated in years
t = Year

19
 THE DESCENDING BALANCE
METHOD

L E T ’ S D I V E I N

BV t = BV t− 1 (1 −d )
t
BV t = P (1− d )
BV t
ln
P
❑ =t
ln ( 1 − d )

VA R I A B L E

d = depreciation rate
BVt= book value in year t
P = initial value of assets
T = depreciation time

20
 SINKING FUND
L E T ’ S D I V E I N

This method uses the assumption that the decline in the

value of an asset will accelerate from one moment to the
next. The steps that must be taken are to calculate the
uniform series value of the difference between the initial
asset value (P) and the asset's residual value

H O W

F P−S
A= =

( ( 1 +i ) n − 1
i ) ( ( 1 +i ) n − 1
i )

21
 P R O D U C T I O N U N I T D E P R E C I AT I O N
METHOD

L E T ’ S D I V E I N

Ut
Dt = ( P − S )
U

( )
t
( P− S )
BV t=P −
U
∑Un
n=1

VA R I A B L E S

Ut = total output in period t

U = total amount of output
P = initial asset value
S = residual value

22
1. Mesin bubut memiliki nilai perolehan sebesar 65 juta. Umur ekonomis sebesar 5 tahun dan nilai sisa pada
akhir tahun ke-5 adalah 5 juta. Dengan metode SOYD, tentukan besar depresiasi dan nilai buku setiap
tahunnya!
2. Mesin bubut memiliki nilai perolehan 100 juta. Jika perhitungan depresiasi menggunakan metode
keseimbangan menurun dengan rate sebesar 12% per tahun. Hitunglah besarnya depresiasi dan nilai buku
pada tahun ke-4!
3. Harga awal sebuah asset adalah sebesar 55 juta dengan umur ekonomis 5 tahun dan nilai sisa sebesar 5 juta
rupiah. Pendapatan kotor pertahun diperkirakan sebesar 20 juta. Biaya pertahun diperkirakan sebesar 5 juta.
Perhitungan depresiasi menggunakan garis lurus. Besar pajak adalah 10 persen. Hitunglah pajak pertahun
selama 5 tahun!
4. Sebuah truk barang memiliki nilai perolehan sebesar 350 juta, umur ekonomisnya sebesar 5 tahun dengan
nilai sisa 50 juta rupiah. Truk tersebut digunakan untuk mengangkut batubara selama 5 tahun dengan
kapasitas pertahun berturut-turut adalah 200 ton, 150 ton, 400 ton, 100 ton dan 150 ton. Hitunglah
besarnya depresiasi dan nilai buku per tahun.
5. Berikut ini adalah hasil dari 3 alternatif investasi. Tentukan investasi yang menguntungkan dengan minimax
regret! Alternative ECONOMIC CONDITIONS
Investment Bad Moderate Good
A 70 -120 300
B 40 200 -80
C 30 240 400
D -80 -80 800 23
Each asset or item is depreciated. This occurs due to several things such
as physical damage due to the use of tools, obsolescence or the
existence of newer technology which results in old tools or technology
becoming outdated. The amount of depreciation per year that is charged
depends on the initial cost of the investment, the estimated life and the
depreciation method used

SUMMARY
 THANK YOU

teknik@puterabatam.ac.id
Industrial Engineering +62 823-9128-7111
Department

W W W. U P B ATA M . A C . I D