SAMPLE PROBLEM NO.

1
An electronic balance costs ₱90,000 and has an estimated salvage value of ₱8,000 at the end
of its 10 years life time. What would be the book value after three years? Use SLM.
Given:
CO=₱90,000
CL=₱8,000
L=10 yrs
n=3 yrs

Req’d: C3

Sol’n:

Using SLM;

𝐶 −𝐶
𝑑=
𝐿

₱90,000 − ₱8,000
𝑑=
10

𝑑 = ₱8,200

𝐷 = 𝑛𝑑

𝐷 = 3(₱8,200)

𝐷 = ₱24,600

𝐶 =𝐶 −𝐷

𝐶 = ₱90,000 − ₱24,600

𝑪𝟑 = ₱𝟔𝟓, 𝟒𝟎𝟎
SAMPLE PROBLEM NO.2
A broadcasting corporation purchased an equipment for ₱53,000 and paid ₱1,500 for freight
and delivery charges to the job site. The equipment has a normal life of 10 years with a trade-
in value of ₱5,000 against the purchase of a new equipment at the end of the life.
a. Determine the annual depreciation cost using SLM.
b. Determine the annual depreciation cost using SFM. Assume interest at 6.5% compounded
annually.

Given:
CO=₱53,000+₱1,500=₱54,500
CL=₱5,000
L=10 yrs

Req’d: a. d using SLM

b. d using SFM if i=6.5%

Sol’n:

Using SLM;

𝐶 −𝐶
𝑑=
𝐿

₱54,500 − ₱5,000
𝑑=
10

𝑑 = ₱4,950

Using SFM;

𝑖
𝑑 = (𝐶 − 𝐶 )
(1 + 𝑖) − 1

0.065
𝑑 = (₱54,500 − ₱5,000)
(1 + 0.065) −1

𝑑 = ₱3,668
SAMPLE PROBLEM NO.3
A firm bought an equipment for P56,000. Other expenses including installation amounted to
P4,000. The equipment is expected to have a life of 16 years with a salvage value of 10% of
the original cost. Determine the book value at the end of 12 years by (a) SLM, (b) SFM at 12%
interest.

Given:
CO=₱56,000+₱4,000=₱60,000
CL=10%CO=₱6,000
L=16 yrs
n=12 yrs

Req’d: a. C12 using SLM

b. C12 using SFM if i=12%

Sol’n:

Using SLM;

𝐶 −𝐶
𝑑=
𝐿

₱60,000 − ₱6,000
𝑑=
16

𝑑 = ₱3,375

𝐷 = 𝑛𝑑

𝐷 = 12(₱3,375)

𝐷 = ₱40,500

𝐶 =𝐶 −𝐷

𝐶 = ₱60,000 − ₱40,500

𝑪𝟏𝟐 = ₱𝟏𝟗, 𝟓𝟎𝟎

Using SFM:

(1 + 𝑖) − 1
𝐷 = (𝐶 − 𝐶 )
(1 + 𝑖) − 1
 (1 + 0.12) −1
𝐷 = (₱60,000 − ₱6,000)
(1 + 0.12) −1

𝐷 = ₱30,481.62

𝐶 =𝐶 −𝐷

𝐶 = ₱60,000 − ₱30,481.62

𝑪𝟏𝟐 = ₱𝟐𝟗, 𝟓𝟏𝟖. 𝟑𝟖

SAMPLE PROBLEM NO.4
A structure costs ₱12,000 new. It is estimated to have a life of 5 years with a salvage value at
the end of the life of ₱1,000. Determine the book value at the end of each year of life. Use SYD
Method.

Given:
CO=₱12,000
CL=₱1,000
L=5 yrs

Req’d: C1 – C5 using SYD

Sol’n:

𝐿
𝑌𝑒𝑎𝑟𝑠 = (𝐿 + 1)
2

5
𝑌𝑒𝑎𝑟𝑠 = (5 + 1) = 15
2

𝐶 =𝐶 −𝐷

Where;

𝐶 =𝐶 −𝑑

𝐿 5
𝐶 = 𝐶 − ( 𝐶𝑂 − 𝐶𝐿 ) = ₱12,000 − (₱12,000 − ₱1,000) = ₱8,333.33
∑ 𝑌𝑒𝑎𝑟𝑠 15

𝐶 =𝐶 −𝑑

𝐿−1 4
𝐶 = 𝐶 − ( 𝐶𝑂 − 𝐶𝐿 ) = ₱8,333.33 − (₱12,000 − ₱1,000) = ₱5,400.00
∑ 𝑌𝑒𝑎𝑟𝑠 15

𝐶 =𝐶 −𝑑

𝐿−2 3
𝐶 = 𝐶 − ( 𝐶𝑂 − 𝐶𝐿 ) = ₱5,400 − (₱12,000 − ₱1,000) = ₱3,200.00
∑ 𝑌𝑒𝑎𝑟𝑠 15

𝐶 =𝐶 −𝑑

𝐿−3 2
𝐶 = 𝐶 − ( 𝐶𝑂 − 𝐶𝐿 ) = ₱3,200 − (₱12,000 − ₱1,000) = ₱1,733.33
∑ 𝑌𝑒𝑎𝑟𝑠 15

𝐶 =𝐶 −𝑑
 𝐿−4 1
𝐶 = 𝐶 − ( 𝐶𝑂 − 𝐶𝐿 ) = ₱1,733.33 − (₱12,000 − ₱1,000) = ₱1,000.00
∑ 𝑌𝑒𝑎𝑟𝑠 15
SAMPLE PROBLEM NO.5
A contractor imported a bulldozer for his job, paying ₱250,000 to the manufacturer. Freight and
insurance charges amounted to ₱18,000; customs’ broker’s fees and services, ₱8,500; taxes, permits
and other expenses, ₱25,000. If the contractor estimates the life of the bulldozer to be 10 years with
a salvage value of ₱20,000, determine the book value at the end of 6 years, using (a) SLM, (b) SFM at
8% and (c) DBM.

Given:
CO=₱250,000+₱18,000+₱8,500+₱25,000=₱301,500
CL=₱20,000
L=10 yrs
n=6 yrs

Req’d: a. C6 using SLM

b. C6 using SFM if i=8%
c. C6 using DBM

Sol’n:

Using SLM;

𝐶 −𝐶
𝑑=
𝐿

₱301,500 − ₱20,000
𝑑=
10

𝑑 = ₱28,150

𝐷 = 𝑛𝑑

𝐷 = 6(₱28,150)

𝐷 = ₱168,900

𝐶 =𝐶 −𝐷

𝐶 = ₱301,500 − ₱168,900

𝑪𝟔 = ₱𝟏𝟑𝟐, 𝟔𝟎𝟎

Using SFM:

(1 + 𝑖) − 1
𝐷 = (𝐶 − 𝐶 )
(1 + 𝑖) − 1
 (1 + 0.08) − 1
𝐷 = (₱301,500 − ₱20,000)
(1 + 0.08) − 1

𝐷 = ₱142,550.31

𝐶 =𝐶 −𝐷

𝐶 = ₱301,500 − ₱142,550.31

𝑪𝟔 = ₱𝟏𝟓𝟖, 𝟗𝟒𝟗. 𝟔𝟗

Using DBM:

𝐶
𝑘 = 1−
𝐶

₱20,000
𝑘 =1−
₱301,500

𝑘 = 0.2376

𝐶 = 𝐶 (1 − 𝑘)

𝐶 = 𝐶 (1 − 𝑘)

𝐶 = ₱301,500 (1 − 0.2376)

𝑪𝟔 = ₱𝟓𝟗, 𝟐𝟎𝟖. 𝟓𝟖
SAMPLE PROBLEM NO.6
The original cost of a certain piece of equipment is ₱150,000 and it is depreciated by a 10%
SFM. 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 ₱14,000 each year by SLM.

Given:
CO=₱150,000
d=₱14,000 (by SLM)
L=10 yrs

Req’d: d using SFM at i=10%

Sol’n:

Using SFM:

𝑖
𝑑 = (𝐶 − 𝐶 )
(1 + 𝑖) − 1

But we need to find the CL first. We can solve the book value after 10 years by using the SLM. Since;

𝐶 −𝐶
𝑑=
𝐿

𝐶 = 𝐶 − 𝑑𝐿

𝐶 = ₱150,000 − ₱14,000(10)

𝐶 = ₱10,000

Now, we can solve for the annual depreciation using SFM;

0.1
𝑑 = (₱150,000 − ₱10,000)
(1 + 0.1) −1

𝒅 = ₱𝟖, 𝟕𝟖𝟒. 𝟑𝟔
SAMPLE PROBLEM NO.7
ABC 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 necessary if the depreciation used is the SYD method.

Given:
d=20%CO

Req’d: L using SYD method

Sol’n:

Using;

𝐿
𝑌𝑒𝑎𝑟𝑠 = (𝐿 + 1)
2

Since;

𝐿
𝑑 = (𝐶 − 𝐶 )
∑ 𝑌𝑒𝑎𝑟𝑠

And;

𝑑 = 0.20𝐶

𝐿
0.20𝐶 = (𝐶 − 𝐶 )
∑ 𝑌𝑒𝑎𝑟𝑠

𝐿
0.20𝐶 = (𝐶 ) 𝐿
(𝐿 + 1)
2

2
0.20 =
𝐿+1

2
𝐿= −1
0.20

𝑳 = 𝟗 𝒚𝒆𝒂𝒓𝒔
SAMPLE PROBLEM NO.8
A radio service panel truck initially cost ₱560,000. Its resale value at the end of the 5 years
of the useful life is estimated at ₱150,000. By means of declining balance method, determine
the depreciation charge for the second year.

Given:
CO=₱560,000
CL=₱150,000
L=5 yrs
n=2 yrs

Req’d: d2 using DBM

Sol’n:

Using DBM:

𝐶
𝑘 = 1−
𝐶

₱150,000
𝑘 = 1−
₱560,000

𝑘 = 0.2316

𝐶 = 𝐶 (1 − 𝑘)

𝐶 = 𝐶 (1 − 𝑘)

𝐶 = ₱560,000 (1 − 0.2316)

𝐶 = ₱430,304

𝐶 = 𝐶 (1 − 𝑘)

𝐶 = ₱560,000 (1 − 0.2316)

𝐶 = ₱330,645.59

𝑑 =𝐶 −𝐶

𝑑 = ₱430,304 − ₱330,645.59
𝒅𝟐 = ₱𝟗𝟗, 𝟔𝟓𝟖. 𝟒𝟏