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  • Sum of The Years Digit Method

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    Jhian Salazar
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    The Sum of the Years Digit Method document describes a depreciation formula and provides examples of how to calculate depreciation charges for assets over multiple years based on their initial cost, estimated life, salvage value, and other factors. It shows computing depreciation for the first year of an asset that costs $120,000 and will be sold for $12,000 after 10 years of use. It also demonstrates finding the depreciation charge and book value for a $250,000 piece of equipment after 10 years of a 15 year estimated life.

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    Engineering economy

    Original Title

    SUM-OF-THE-YEARS-DIGIT-METHOD

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    The Sum of the Years Digit Method document describes a depreciation formula and provides examples of how to calculate depreciation charges for assets over multiple years based on their initial cost, estimated life, salvage value, and other factors. It shows computing depreciation for the first year of an asset that costs $120,000 and will be sold for $12,000 after 10 years of use. It also demonstrates finding the depreciation charge and book value for a $250,000 piece of equipment after 10 years of a 15 year estimated life.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
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    20 views6 pages

    Sum of The Years Digit Method

    Uploaded by

    Jhian Salazar
    The Sum of the Years Digit Method document describes a depreciation formula and provides examples of how to calculate depreciation charges for assets over multiple years based on their initial cost, estimated life, salvage value, and other factors. It shows computing depreciation for the first year of an asset that costs $120,000 and will be sold for $12,000 after 10 years of use. It also demonstrates finding the depreciation charge and book value for a $250,000 piece of equipment after 10 years of a 15 year estimated life.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
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    of 6

    SUM OF THE

    YEARS DIGIT
    METHOD
    SUM OF THE YEARS DIGIT
    METHOD
    FORMULA:

    Depreciation charge at year m: Total Depreciation at year m


    EXAMPLE 1
    An asset is purchased for P120,000. Its estimated economic life is 10
    years, after which it will be sold for P12,000. Find the depreciation
    charge for the first year. (19,636.36)
    EXAMPLE 2
    An equipment costing P250,000 has an estimated life of 15 years
    with a book value of P30,000 at the end of the period. Compute the
    depreciation charge and its book value after 10 years. (d = 11,000 &
    BV = 57,500)
    EXAMPLE 3
    XYZ Corporation makes it a policy that for any new equipment
    purchased, the annual depreciation cost should not exceed 20% of
    the first cost at any time with no salvage value. Determine the length
    of service life. (9 years)
    EXAMPLE 4
    The depreciation charge of a machine should not go below P10,500 at
    any time with a salvage value of P27,500. If the machine costs
    P500,000;
    ◦ Determine its service life. (9 years)

    ◦ On what year will its value be less than half its original cost? (2.97
    years)

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