UNIVERSITY OF THE EAST -CALOOCAN

Civil Engineering Department

Depreciation Concept

SUBMITTED BY

Julie Ann Zafra

20191179836

SUBMITTED TO:

Engr. Reyman Solas

October 11, 2022

NCE 4103 - ENGINEERING ECONOMICS 2022

1. ME Board Exam April 2002

An asset was purchased at P480,000.00. it has an estimated life of 10 years, and will be
sold at P50,000.00 at that time. What is the depreciation for the first year?
Answer: P43,000.00 per year
SOLUTION:
𝑆 = 50,000
𝑃 = 480,000
𝐿 = 10 𝑦𝑒𝑎𝑟𝑠

𝑃−𝑆
𝑑=
𝐿
480,000 − 50,000
𝑑=
10
𝒅 = 𝑷𝟒𝟑, 𝟎𝟎𝟎 𝒑𝒆𝒓 𝒚𝒆𝒂𝒓

2. EE Board Exam April 1997/ ME Board Exam April 1998

A machine has a n initial cost of p50,000.00 and a salvage value of P10,000.00 after 10
years. Find/What is the book value after five years using straight-line depreciation?
Answer: P30,000.00
SOLUTION:
𝑆 = 10,000
𝑃 = 50,000
𝐿 = 10 𝑦𝑒𝑎𝑟𝑠
𝑛 = 5 𝑦𝑒𝑎𝑟𝑠
𝑃−𝑆
𝑑=
𝐿
50,000 − 10,000
𝑑=
10
𝑑 = 𝑃4,000

4000(5) = 20,000
𝐵𝑉5 = 50,000 − 20,000
𝑩𝑽𝟓 = 𝑷𝟑𝟎, 𝟎𝟎𝟎. 𝟎𝟎

3. ME Board Exam April 1998

An asset was purchased for P500,000.00. The salvage after 25 years is P100,000.00.
What us the total depreciation for the first three years using straight-line method?
Answer: P48,000.00

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NCE 4103 - ENGINEERING ECONOMICS 2022
SOLUTION:
𝑆 = 100,000
𝑃 = 500,000
𝐿 = 25 𝑦𝑒𝑎𝑟𝑠
𝑃−𝑆
𝑑=
𝐿
500,000 − 100,000
𝑑=
25
𝑑 = 𝑃16,000

𝐷𝑛 = 16,000 ∗ 3
𝑫𝒏 = 𝑷𝟒𝟖, 𝟎𝟎𝟎. 𝟎𝟎

4. ECE Board Exam April 2004

A heavy-duty copying machine was procured for P100,000.00 with an estimated salvage
value of P10,000.00 after 10 years. What is the book value after five years? Use straight-
line depreciation.
Answer: P55,000.00
SOLUTION:
𝑆 = 10,000
𝑃 = 100,000
𝐿 = 10 𝑦𝑒𝑎𝑟𝑠
𝑛 = 5 𝑦𝑒𝑎𝑟𝑠
𝑃−𝑆
𝑑=
𝐿
100,000 − 10,000
𝑑=
10
𝑑 = 𝑃9,000
9000(5) = 45,000
𝐵𝑉5 = 100,000 − 45,000
𝑩𝑽𝟓 = 𝑷𝟓𝟓, 𝟎𝟎𝟎. 𝟎𝟎

5. ME Board Exam April 1992

A unit of welding machine costs P45,000.00 with an estimated life of 5 years. Its salvage
value is P2500.00. Find its depreciation rate by straight-line method.
Answer: 18.89%

SOLUTION:
𝑆 = 2,500
𝑃 = 45,000

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NCE 4103 - ENGINEERING ECONOMICS 2022
𝐿 = 5 𝑦𝑒𝑎𝑟𝑠

𝑃−𝑆
𝑑=
𝐿
45,000 − 2,500
𝑑=
5
𝑑 = 𝑃8,500

𝑑
𝑘=
𝑃
8500
𝑘=
45,000
𝑘 = 0.1888 ∗ 100
𝒌 = 𝟏𝟖. 𝟖𝟗%
6. ECE Board Exam November 2000
What is the book value of electronic test equipment after 8 years of use if it depreciates
from its original value of P120,000.00 to its salvage value of 13% in 12 years? Use
straight-line method.
Answer: P50,400.00
SOLUTION:
𝑆 = 13%(120,000) = 15,600
𝑃 = 120,000
𝐿 = 12 𝑦𝑒𝑎𝑟𝑠
𝑛 = 8 𝑦𝑒𝑎𝑟𝑠

𝑃−𝑆
𝑑=
𝐿
120,000 − 15,600
𝑑=
12
𝑑 = 𝑃8,700

8700(8) = 69,600
𝑃 − 𝐷𝑛 = 120,000 − 69,600
𝑷 − 𝑫𝒏 = 𝑷𝟓𝟎, 𝟒𝟎𝟎. 𝟎𝟎

7. ME Board Exam November 1992

The initial cost pf a 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 P50,000.00 and the cost of dismantling is estimated to be P15,000.00.
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?
Answer: P76,500.00; P341,000.00

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NCE 4103 - ENGINEERING ECONOMICS 2022
SOLUTION:

𝑆 = 50,000 − 15,000 = 35,000

𝑃 = 800,000
𝐿 = 10 𝑦𝑒𝑎𝑟𝑠
𝑛 = 6 𝑦𝑒𝑎𝑟𝑠

𝑃−𝑆
𝑑=
𝐿
800,000 − 35,000
𝑑=
10
𝒅 = 𝑷𝟕𝟔, 𝟓𝟎𝟎

𝐷𝑛 = 76500(6)
𝐷𝑛 = 459,000
𝐷𝑉6 = 800,000 − 459,000
𝑫𝑽𝟔 = 𝑷𝟑𝟒𝟏, 𝟎𝟎𝟎. 𝟎𝟎

8. CE Board Exam November 2006

An equipment has a salvage value of P1M at the end of 50 years. The straight
depreciation charge is P2M. a) What is the first cost of the machine? B) What is the book
value after 25 years? C) At what year will its total depreciation be P30M?
Answer: P101M; P51M; year 15
SOLUTION:
𝑆 = 1,000,000
𝑃 = 2,000,000
𝐿 = 50 𝑦𝑒𝑎𝑟𝑠

a.
𝑃−𝑆
𝑑=
𝐿
𝑃 = 𝑑𝐿 + 𝑆
𝑃 = 50(2 ∗ 1,000,000 + (1 ∗ 1,000,000)
𝑷 = 𝟏𝟎𝟏, 𝟎𝟎𝟎, 𝟎𝟎𝟎

b.
𝐷𝑛 = 25(2 ∗ 1,000,000)
𝐷𝑛 = 50,000,000
𝐷𝑉25 = 𝑃 − 𝐷𝑛
𝐷𝑉25 = 101,000,000 − 50,000,00
𝑫𝑽𝟐𝟓 = 𝑷𝟓𝟏, 𝟎𝟎𝟎, 𝟎𝟎𝟎. 𝟎𝟎

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NCE 4103 - ENGINEERING ECONOMICS 2022

c.
𝐷𝑛 = 𝑑𝑛
30 ∗ 1,000,000 = 2,000,000(𝑛)
𝒏 = 𝟏𝟓 𝒚𝒆𝒂𝒓𝒔

9. A chemical company acquired a mixing machine at a total cost of P95,000.00. It is

expected to wear out in six years with a total salvage value of P15,000.00. Show the
book value of the machine after each year of service by preparing an SLM depreciation
table.
SOLUTION:
Year Depreciation Accumulate Book value at the
Charge Per Depreciation at the end end year
Year of the year
1 13,333.33 13,333.33 81,666.67

2 13,333.33 26,666.67 68,333.33

3 13,333.33 39,999.997 55,000.00

4 13,333.33 53,333.33 41,666.67

5 13,333.33 66,666.66 28,333.34

6 13,333.33 79,999.99 15,000.01

10. ECE Board Exam October 2011

A machine used for construction costs P20,000.00. Its salvage value is P2000.00 after 10
years. What is its annual depreciation using the sinking fund method with 2% interest?
Answer: P1643.88
SOLUTION:
𝑆 = 2,000
𝑃 = 20,000
𝑖=2
𝐿 = 10
𝑖
𝑑 = 𝑃 −𝑆( − 1]
(1 + 𝑖)10
0.02
𝑑 = 20,000 − 2,000 ( − 1]
(1 + 0.02)10
𝒅 = 𝑷𝟏𝟔𝟒𝟑. 𝟖𝟖

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NCE 4103 - ENGINEERING ECONOMICS 2022
11. A-1 supermarket purchased an open shelf chiller for P40,000.00. Shipping and
installation costs amounted to P15,000.00 and P1000.00, respectively. The sinking fund
method with 6.5% interest is to be used over a useful life of eight years. For a salvage
value of P4500.00, determine a) the amount in the sinking fund after four years; b) the
book value at the end of six years.
Answer: P16,619.53; P15.862.56
SOLUTION:
𝑆 = 4,500
𝑃 = 40,000 + 1500 + 1000 = 42,500
𝑖 = 6.5%
𝐿=8
𝑛=4
a.
(1 + 𝑖)𝑛 − 1
𝐷𝑛 = 𝑃 − 𝑆 ( )
(1 + 𝑖)𝐿 − 1
(1 + 0.65)4 − 1
𝐷𝑛 = 42,500 − 4,500 ( )
(1 + 0.65)8 − 1
𝑫𝒏 = 𝟏𝟔, 𝟔𝟏𝟗. 𝟓𝟑
b.
(1 + 𝑖)6 − 1
𝐷𝑛 = 𝑃 − 𝑆 ( )
(1 + 𝑖)2 − 1
𝐷𝑛 = 26,637.44
𝐵𝑉6 = 𝑃 − 𝐷𝑛
𝐵𝑉6 = 42,500 − 26,637.44
𝑩𝑽𝟔 = 𝟏𝟓, 𝟖𝟔𝟐. 𝟓𝟔

12. A four-stroke motorbike costs P75,000.00. It will have a salvage value of P10,000.00
when worn out at the end of eight years. Determine the annual replacement deposit,
and present a depreciation schedule using the SFF at 5%.
Answer: P6806.92
SOLUTION:
𝑆 = 10,000
𝑃 = 75,000
𝑖 = 5%
𝐿=8
𝑖
𝑑 = 𝑃 −𝑆( − 1]
(1 + 𝑖)𝐿
0.05
𝑑 = 75,000 − 10,000 ( − 1]
(1 + 0.05)8

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NCE 4103 - ENGINEERING ECONOMICS 2022
𝒅 = 𝟔, 𝟖𝟎𝟔. 𝟗𝟐

13. EE Board Exam May 2003

The original cost of a certain piece of equipment is P150,000.00 and it is depreciated by
a 10% sinking fund method. Determine the annual depreciation charge if the book value
of the equipment after 10 years is the same as if it had been depreciated at P14,000.00
each year by straight-line method.
Answer: P8784.36
SOLUTION:
𝑃 = 150,000
𝑙 = 10%
𝑖 = 10%
𝑃−𝑆
𝑑=
𝐿
150,000 − 𝑆
14,000 =
10

𝑆 = 10,000
𝑖
𝑑 = 𝑃 −𝑆( − 1]
(1 + 𝑖)𝐿
0.10
𝑑 = 150,000 − 10,000 ( − 1]
(1.10)10
𝒅 = 𝟖, 𝟕𝟖𝟒. 𝟑𝟔

14. A machine that costs P75,000.00 five years ago now cost P45,864.31, 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.
Answer: P5000.00
SOLUTION:
𝑃 = 75,000
𝐿 = 10
𝑖 = 7%
𝐵𝑉5 = 45,864.31

𝐷5 = 𝑃 − 𝐵𝑉5
𝐷5 = 75,000 − 45,864.31
𝐷5 = 29,135.69

(1 + 𝑖)𝑛 − 1
𝐷𝑛 = 𝑃 − 𝑆 ( )
(1 + 𝑖)𝐿 − 1

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NCE 4103 - ENGINEERING ECONOMICS 2022
(1 + 0.07)5 − 1
29,135.69 = 75,000 − 𝑆 ( )
(1.07)10 − 1
𝑺 = 𝑷𝟓, 𝟎𝟎𝟎. 𝟎𝟎

15. A manufacturing company purchased a delivery van for P650,000.00. After six years of
use, the van is expected to be sold for P165,000.00 Using SFF, determine the interest
rate of be applied if the book value after three years is calculated at P421,750.00.
Answer: 4%
SOLUTION:
𝑆 = 165,000
𝑃 = 650,000
𝐵𝑉3 = 421,750.00
𝑛 = 3 𝑦𝑒𝑎𝑟𝑠

𝐷3 = 650,000 − 421,750
𝐷3 = 228,250

(1 + 𝑖)𝑛 − 1
𝐷3 = 𝑃 − 𝑆 ( )
(1 + 𝑖)𝐿 − 1
(1 + 𝑖)3 − 1
228,250 = 450,000 − 165,000 ( )
(1 + 𝑖)6 − 1
𝒊 = 𝟎. 𝟎𝟒 𝒐𝒓 𝟒%

16. CE Board Exam May 2006

An equipment costing P60,000.00 has a book value of P4000.00 after 8 years. Find the
constant percentage of the declining book value.
Answer: 28.72%
SOLUTION:
𝑃 = 60,000
𝐵𝑉8 = 4,000
𝑛 = 8 𝑦𝑒𝑎𝑟𝑠

𝐵𝑉𝑛 = 𝑃(1 − 𝑘)𝑛

4,000 = 6,000(1 − 𝑘)8
𝒌 = 𝟎. 𝟐𝟖𝟕𝟐 𝒐𝒓 𝟐𝟖. 𝟕𝟐%

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NCE 4103 - ENGINEERING ECONOMICS 2022
17. ECE Board Exam April 2000
A machine costing P1000,000.00 depreciates at 10% annually. What is its book value
after 5 years?
Answer: P59,049.00
SOLUTION:
𝑃 = 100,000
𝑘 = 0.10
𝑛 = 5 𝑦𝑒𝑎𝑟𝑠

𝐵𝑉5 = 𝑃(1 − 𝑘)𝑛

𝐵𝑉5 = 100,000(1 − 0,10)5
𝑩𝑽𝟓 = 𝑷𝟓𝟗, 𝟎𝟒𝟗. 𝟎𝟎

18. ECE Board Exam April 2000/ April 2001/ April 2014
A VOM has current selling price of P400.00. If its selling price is expected to decline at
the rate of 10% per annum due to obsolescence, what will be its selling price after 5
years?
Answer: P236.20
SOLUTION:
𝑃 = 400
𝑘 = 10%
𝑛 = 5 𝑦𝑒𝑎𝑟𝑠
𝐵𝑉5 = 𝑃(1 − 𝑘)𝑛
𝐵𝑉5 = 400(1 − 0.10)5
𝑩𝑽𝟓 = 𝑷𝟐𝟑𝟔. 𝟐𝟎

19. ECE Board Exam November 2000

What is the book value of electronic test equipment after 8 years of use if it depreciates
from its original value of P120,000.00 to its salvage value of 13% in 12 years? Use
declining balance method.
Answer: P30,794.76
SOLUTION:
𝑆 = 120,000 ∗ 13% = 15,600
𝑃 = 120,000
𝐿 = 12
𝑛 = 8 𝑦𝑒𝑎𝑟𝑠

𝑆 1
𝑘 = 1 − ( )𝐿
𝑃

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NCE 4103 - ENGINEERING ECONOMICS 2022
15,600 1
𝑘 =1−( )12
120,000
𝑘 = 0.1564
𝐵𝑉8 = 𝑃(1 − 𝑘)𝑛
𝐵𝑉8 = 120,000(1 − 0.1564)8
𝑩𝑽𝟖 = 𝑷𝟑𝟎, 𝟕𝟗𝟒. 𝟕𝟔

20. A 50-kVA genset that costs P80,000.00 is expected to have a salvage value of P8009.00.
Determine its economic life using the Matheson formula, if the estimated book value
after three years is P33,750.00
Answer: 8 years
SOLUTION:
𝑆 = 8,009
𝑃 = 80,000
𝐵𝑉3 = 33,750
𝐵𝑉3 1
𝑘 =1−( )3
𝑃
33,750 1
𝑘 =1−( )3
80,000
𝑘 = 0.25 𝑜𝑟 25%
𝑆 = 𝑃(1 − 𝑘)𝐿
8009 = 80,000(1 − 0.25)𝐿
𝑳 = 𝟖 𝒚𝒆𝒂𝒓𝒔

21. Find the accumulated depreciation after five years and the book value on the seventh
year for the genset unit given in no. 20 using a depreciation table.
Answer: P61,015.63; P10,678.71
SOLUTION:
Year Depreciation Charge per Accumulated Depreciation Book value at the end
year (𝒅𝒏 ) at the end of the year (𝑫𝒏 ) of the year (𝑩𝑽𝒏 )

1 20,000 20,000 60,000

2 15,000 35,000 45,000

3 11,250 46,250 33,750

4 8437.50 54,687.50 25,312.50

5 6328.125 61,015.625 18,984.375

6 4746.09 65761.72 14,238.28

7 3559.57 69231.29 10,768.71

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22. CE Board Exam November 1998

A machine having a first cost of P60,000.00 will be retired at the end of eight years.
Depreciation cost is computed using a constant percentage of the declining book value.
What is the total cost of depreciation in pesos, up to the time the machine is retired if
the annual rate of depreciation is 28.72%?
Answer: P56,000.00
SOLUTION:

𝑃 = 60,000
𝐿 = 8 𝑦𝑒𝑎𝑟𝑠
𝑘 = 28.72%

𝑆 = 𝑃(1 − 𝑘)𝐿
𝑆 = 60,000(1 − 28.72%)8
𝑆 = 3998.46

𝐷𝑛 = 𝑃 − 𝑆
𝐷𝑛 = 60,000 − 3998.46
𝑫𝒏 = 𝑷𝟓𝟔, 𝟎𝟎𝟏. 𝟓𝟒

23. CE Board Exam May 2004

An equipment costing P200,000.00 has an estimated scrap value of P25,000.00 at the
end of its economic life of 10 years. Using the Double- Declining Balance Method of
depreciation, what is the book value after eight years of service?
Answer: P33,554.00
SOLUTION:
𝑃 = 200,000
𝐿 = 10 𝑦𝑒𝑎𝑟𝑠
𝑆 = 25,000

2 8
𝐵𝑉8 = 𝑃(1 − )
10
2 8
𝐵𝑉8 = 200,000(1 − )
10
𝑩𝑽𝟖 = 𝑷𝟑𝟑, 𝟓𝟓𝟒. 𝟎𝟎

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24. An asset that costs P110,000.00 has a useful life of nine years. Determine its
accumulated depreciation after seven years and its salvage value by preparing a DDBM
depreciation table.
Answer: P91,059.94; P11,457.57

SOLUTION:
Year Depreciation Charge Accumulated Depreciation Book value at the end
per year (𝒅𝒏 ) at the end of the year of the year (𝑩𝑽𝒏 )
(𝑫𝒏 )
1 24,444.44 24,444.44 86,555.56

2 19,012.35 43,456.79 66,543.21

3 14,787.38 58,244.17 51,755.83

4 11,501.30 69,745.47 40,254.53

5 8,945.45 78,690.92 31,309.08

6 6,957.57 85,648.49 24,351.51

7 5,411.45 91,059.94 18,940.06

8 4208.90 95,268.84 14,731.16

9 3273.59 98,542.43 11,457.57

25. ME Board Exam October 1997

An asset is purchased of P120,000.00. Its estimated life is 10 years, after which it will be
sold for P12,000.00. Find the depreciation for the first year using the sum-of-the-year’s
digit method.
Answer: P19,637.00
SOLUTION:
𝑆 = 12,000
𝑃 = 120,000
𝐿 = 10 𝑦𝑒𝑎𝑟𝑠
𝑛=1
10(10 + 1)
𝑦= = 55
2

𝐿−𝑛+1
𝑑𝑛 = 𝑃 − 𝑆 ( )
𝑦

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NCE 4103 - ENGINEERING ECONOMICS 2022
10 − 1 + 1
𝑑𝑛 = 120,000 − 12,000 ( )
55
𝒅𝒏 = 𝟏𝟗, 𝟔𝟑𝟕. 𝟎𝟎

26. ME Board Exam April 1997

An asset is purchased for P9000.00. Its estimated life is 10 years, after which it will be
sold for P1000.00. Find the book value during the second year if sum-of-the-year’s digit
(SOYD) depreciation is used.
Answer: P6236.00
SOLUTION:
𝑃 = 9,000
𝐿 = 10 𝑦𝑒𝑎𝑟𝑠
𝑆 = 1,000
10(10 + 1)
𝑦= = 55
2

𝐿−𝑛+1
𝐷𝑛 = 𝑃 − 𝑆 ( )
𝑦
10 + 9
𝐷𝑛 = 9,000 − 1,000 ( )
55
𝐷𝑛 = 2,763.64
𝑃 − 𝐷𝑛 = 9,000 − 2,763.64
𝑩𝑽𝟖 = 𝟔𝟐𝟑𝟔. 𝟎𝟎

27. ME Board Exam April 1998

A company purchases an asset for P10,000.00 and plans to keep it for 20 years. If the
salvage value is zero at the end of the 20th year, what is the depreciation in the third
year? Use sum-of-the-year’s digits depreciation.
Answer: P857.00
SOLUTION:
𝑃 = 10,000
𝐿 = 20 𝑦𝑒𝑎𝑟𝑠
𝑆=0
𝑦 = 210

(𝐿 − 𝑛 + 1)1 + (𝐿 − 𝑛 + 1)2 + (𝐿 − 𝑛 + 1)3

𝐷𝑛 = 𝑃 − 𝑆 ( )
𝑦
18
𝐷3 = 10,000 ( )
210
𝑫𝟑 = 𝑷𝟖𝟓𝟕. 𝟏𝟒

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28. CE Board Exam November 2005
An equipment costing P5000,000.00 has a life expectancy of 5 years. Using the sum-of-
the-year’s digit method of depreciation, what must be its salvage value that its
depreciation charge for the first year is p100,000.00?
Answer: P200,000.00
SOLUTION:
𝑃 = 500,000
𝐿=5
𝑑1 = 100,000
5(5 + 1)
𝑦=
2
𝑦 = 15
𝐿
𝑑1 = 𝑃 − 𝑆 ( )
𝑦

5
100,000 = 500,000 − 𝑆 ( )
15
𝑺 = 𝟐𝟎𝟎, 𝟎𝟎𝟎. 𝟎𝟎

29. ECE Board Exam November 1998/ EE Board Exam October 2000
ABC/A certain- corporation makes it a policy that for any/every- new equipment
purchased, the annual depreciation cost should not exceed 20% of the first cost at any
time with no/without-salvage value. Determine the length of service life if the
depreciation used in SYD method.
Answer: 9 years
SOLUTION:
𝑆=0
𝑑𝑛 < 0.2𝑃
𝐿
𝑑1 = 𝑃 − 𝑆 ( )
𝑦
𝐿
0.2𝑃 = 𝑃 − 0 ( )
𝐿(𝐿 + 1)
2
2
0.2 = ( )
𝐿+1
𝑳 = 𝟗 𝒚𝒆𝒂𝒓𝒔

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30. Dolly Dairy Corporation purchased a Bulk Milk Cooler for P480,000.00. Shipping, tax, and
installation costs amounted to P25,000.00, P20,000.00, and P15,000.00. respectively. If
the estimated salvage value is P40,000.00 after seven years, determine the book value
after four years and the depreciation charge on its last year of service by preparing a
SYD depreciation table.
Answer: P147,142.86; P17,857.14
SOLUTION:
𝑃 = 540,000
𝑆 = 40,000
𝐿=7
𝐵𝑉4 =?
𝑑𝑦 =?
𝑦 = 28

Year Depreciation Accumulated Book value at the

Charge per year Depreciation at the end of the year
(𝒅𝒏 ) end of the year (𝑩𝑽𝒏 )
(𝑫𝒏 )
1 125,000 125,000 415,000

2 107,142.86 232,142.86 307,857.14

3 89,285.71 321,428.57 218,571.43

4 71,428.57 392,857.14 147,142.86

5 53,571.43 496,428.57 93,571.43

6 35,714.29 482,142.86 57,857.14

7 17,857.14 500,000 40,000.00

31. ECE Board Exam April 1999

A telephone company purchased microwave radio equipment for P6 million, freight and
installation charges amounted to 4% of the purchased price. If the equipment will be
depreciated over a period of 10 years with a salvage value of 8%, determine the
depreciation cost during the 5th year using SYD.
Answer: P626,269.10
SOLUTION:
𝑃 = 6,240,000
𝑆 = 499,200
𝐿 = 10
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NCE 4103 - ENGINEERING ECONOMICS 2022
10(10 + 1)
𝑦=
2
𝑦 = 55

𝐿−𝑛+1
𝑑𝑛 = 𝑃 − 𝑆 ( )
𝑦
10 − 5 + 1
𝑑𝑛 = 6,240,000 − 499,200 ( )
55
𝒅𝒏 = 𝟔𝟐𝟔, 𝟐𝟔𝟗. 𝟏𝟎

32. A rural cooperative purchased a trencher at a cost of P230,500.00. It is estimated that

the trencher will have a salvage value of P25,000.00 after digging 300,000 meters that
irrigation canals. Determine the book value of the trencher after two years, if it was
used to dig 50,000 meters on the first year and 75,000 meters in the second year.
Answer: P144,875.00
SOLUTION:
𝑃 = 230,500
𝑆 = 25,000
𝑃0𝐿 = 300,000
𝑃01 = 50,000
𝑃02 = 75,000

𝑃−𝑆
𝑑=
𝑃0𝐿
230,500 − 25,000
𝑑=
300,000

𝑑 = 0.685

𝑃 − 𝐵𝑉𝑛
𝑑=
𝑃0

230,500 − 𝐵𝑉𝑛
0.685 =
50,000 + 75,000
𝑩𝑽𝒏 = 𝑷𝟏𝟒𝟒, 𝟖𝟕𝟓. 𝟎𝟎

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33. To package its products, a computer company purchased an automatic packaging
machine for P600,000.00. Freight, insurance and installation charges amounted to
P80,000.00. The machine is expected to be sold for P120,000.00 after packaging
320,000 units. If the machine packaged 40,000 units in its first year, 55,000 in its second
year, and 48,000 units in its third year, determine a) the depreciation charge for the
third year; b) the book value of the machine at the end of the third year.
Answer: P84,000.00; P429,750.00
SOLUTION:
𝑃 = 680,000
𝑆 = 120,000
a.
𝑃−𝑆
𝑑3 = 𝑃03
𝑃0𝐿
680,000 − 120,000
𝑑3 = 48,000
320,000
𝒅𝟑 = 𝟖𝟒, 𝟎𝟎𝟎
b.
680,000 − 120,000
𝐷3 = (40,000 + 55,000 + 48,000)
320,000
𝐷3 = 250,250
𝑃 − 𝐷3 = 680,000 − 250,250
𝑩𝑽𝟑 = 𝑷𝟒𝟐𝟗, 𝟕𝟓𝟎

34. CE Board Exam November 2003

An equipment is bought at P420,000.00 with an economic life of 6 years and a salvage
value of P50,000.00. The first-year depreciation is P105,714.00. The cost of money is
12% per year. What method of depreciation was used?
SOLUTION:
𝑃 = 420,000
𝑆 = 50,000
𝐿 = 6 𝑦𝑒𝑎𝑟𝑠
𝐷𝑛 = 105,714
𝑖 = 12%

𝑃−𝑆
𝑑=
𝐿
420,000 − 50,000
𝑑=
6
𝑑 = 61666.7
𝐷𝑛 = 𝑛𝑑
105,714 ≠ 61,666.67

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(1 + 𝑖)𝑛 − 1
𝐷1 = 𝑃 − 𝑆 ( )
(1 + 𝑖)𝐿 − 1
(1 + 0.12)1 − 1
𝐷1 = 420,000 − 50,000 ( )
(1.12)6 − 1
𝐷1 = 45,593.52

105,714 ≠ 45,593.52

𝐿−𝑛+1
𝐷𝑛 = 𝑃 − 𝑆 ( )
𝑦

6−1+1
105,714 = 420,000 − 50,000 ( )
21
105,714 = 105,714
𝑺𝒀𝑫 𝒎𝒆𝒕𝒉𝒐𝒅 𝒊𝒔 𝒖𝒔𝒆𝒅

35. XZelent Corporation purchased equipment at a cost P18M. Cost of repairs amounted to
P2.5M. the estimated salvage value after 15 years was P2M. Eight years later, the
equipment is rehabilitated at a cost of P4M. Salvage value and economic life was
expected to increase by P0.5M and five years. Using SYD method, determine the book
value at the end of 15 years.
Answer: P4,003,205.13
SOLUTION:
𝑃1 = 20,500,000
𝑆1 = 2,000,000
𝐿1 = 15 𝑦𝑒𝑎𝑟𝑠

15 + 14 + 13 + 12 + 11 + 10 + 9 + 8
𝐷𝑛 = 20,500,000 − 2,000,000 ( )
120
𝐷𝑛 = 14,183,333.33

15(15 + 1)
𝑦=
2
𝑦 = 120
𝐵𝑉8 = 𝑃 − 𝐷𝑛
𝐵𝑉8 = 20,500,000 − 14,183,333.33
𝐵𝑉8 = 6,316,666.67

𝐵𝑉15 = 6,316,666.67 − 6,313,461.54

𝑩𝑽𝟏𝟓 = 𝑷𝟒, 𝟎𝟎𝟑, 𝟐𝟎𝟓. 𝟏𝟑

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36. Solid Builders Corporation purchased a transport mixer for P984,000.00. This equipment
is to be depreciated suing the Matheson formula, estimated life is seven years with a
salvage value of P81,000.00. After five years of use the mixer is overhauled at a cost
P250,000.00, which results in the extension of its useful life by another three years.
Assuming the salvage value did not change; find the depreciation charge and the book
value for the eighth year.
Answer: P60,240.15; P155,756.89
SOLUTION:
𝑃1 = 984,000
𝑆1 = 81,000
𝐿1 = 7 𝑦𝑒𝑎𝑟𝑠

1
𝑆1 𝐿1
𝑘 =1−( )
𝑃1
1
81,000 7
𝑘 =1−( )
984,000
𝑘 = 0.30

𝐵𝑉5 = 984,000(1 − 0.30)5

𝐵𝑉5 = 165,380.88

𝑃2 = 𝐵𝑉5 + 250,000
𝑃2 = 165,380.88 + 250,000
𝑃2 = 415,380.33

1
𝑆1 5
𝑘 =1−( )
𝑃2
1
81,000 5
𝑘 =1−( )
415,380.33

𝑘 = 0.2788

𝑑𝑛 = 𝑃(1 − 𝑘)𝑛−1 𝑘
𝑑𝑛 = 415,380.88(1 − 0.2788)2 (0.2788)
𝒅𝒏 = 𝑷𝟔𝟎, 𝟐𝟑𝟗. 𝟏𝟓

𝐵𝑉3 = 415,380.88(1 − 0.2789)3

𝑩𝑽𝟑 = 𝟏𝟓𝟓, 𝟕𝟓𝟏. 𝟕𝟕

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37. On July1, 1985, Ram Corporation acquired a building at a cost of P3.5M, additional costs
for repairs and improvement amounted to P0.3M. Economic life was estimated at 30
years. On July 1, 1995, the building was renovated at a cost of P1.7M. The expected life
did not change. Using the DDBM, determine the book value of the building on July 1,
2005.
Answer: P1,257,378.02
SOLUTION:
𝑃1 = 3,800,000
𝑛1 = 10
𝐿1 =20 years

2 10
𝐵𝑉10 = 𝑃 (1 − )
30
2 10
𝐵𝑉10 = 3,800,000 (1 − )
30
𝐵𝑉10 = 1,906,124.94

𝑃2 = 1,906,124.94 + 1,700,000
𝑃2 = 3,606,124.94

2 2
𝐵𝑉10 = 3,606,124.94 (1 − )
20
𝑩𝑽𝟏𝟎 = 𝑷𝟏, 𝟐𝟓𝟕, 𝟑𝟕𝟖. 𝟎𝟐

38. St. Francis Cooperative purchased a P45,000.00- pump for its irrigation project. Set-up
and installation cost amounted to P5000.00. Using the SYD method, economic life and
salvage value was initially estimated to be 12 years and P3800.00, respectively. Due to
poor maintenance and continuous exposure to the elements, a re-evaluation after five
years indicated that the remaining economic life is only four years, with a salvage value
of P2500.00. Find the book value of the pump for the seventh year.
Answer: P7865.40
SOLUTION:
𝑃1 = 50,000
𝑆1 = 3,800
𝐿1 = 12 𝑦𝑒𝑎𝑟𝑠
𝑛=6
𝑦 = 78

12 + 11 + 10 + 9 + 8
𝐷𝑛 = 𝑃 − 𝑆 ( )
𝑦

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12 + 11 + 10 + 9 + 8
𝐷𝑛 = 50,000 − 3,800 ( )
78
𝐷𝑛 = 29,615.38

𝐵𝑉5 = 𝑃 − 𝐷𝑛
𝐵𝑉5 = 50,000 − 29,615.38
𝐵𝑉5 = 20,384.62

𝑃2 = 𝐵𝑉5 = 20,384.62
𝑆2 = 2500
𝐿2 = 4 𝑦𝑒𝑎𝑟𝑠
𝑦 = 10

𝐿+3
𝐷𝑛 = 𝑃 − 𝑆 ( )
𝑦
4+3
𝐷𝑛 = 20,384.62 − 2500 ( )
10
𝐷𝑛 = 12,519.23
𝐵𝑉2 = 𝑃 − 𝐷𝑛
𝐵𝑉2 = 20,384.62 − 12,519.23
𝑩𝑽𝟐 = 𝑷𝟕, 𝟖𝟔𝟓. 𝟑𝟗

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