CE40-2 / E01

CONSUEGRA, Eliza Gail Roque November 6, 2020

2018102337 CE-2

M3-CPR
M3-Class Produced Reviewer

a. Straight Line Method

An electronic balance costs P90,000 and has an estimated salvage value of P8,000 at the
end of its 10 years lifetime. What would be the book value after 3 years using the
straight-line method in solving for the depreciation?

n BVB Dn BVE
1 90,000 8,200 81,800
2 81,800 16,400 73,600
3 73,600 24,600 65,400
4 65,400 32,800 57,200
5 57,200 41,000 49,000
6 49,000 49,200 40,800
7 40,800 57,400 32,600
8 32,600 65,600 24,400
9 24,400 73,800 16,200
10 16,200 82,000 8,000

b. Sinking Fund Method

 A film bought equipment for P560,000. 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 of the equipment. Determine the book value at the end of 12
years by sinking fund method at 12% interest.

n BVB Dn BVE
1 564,000 11,882.13 552,117.87
2 552,117.87 25,190.11 538,809.89
3 538,809.89 40,095.06 523,904.94
4 523,904.94 56,788.59 507,211.41
5 507,211.41 75,485.35 488,514.65
6 488,514.65 96,425.72 467,574.28
7 467,574.28 119,878.94 444,121.06
8 444,121.06 146,146.54 417,853.46
9 417,853.46 175,566.26 388,433.74
10 388,433.74 208,516.34 355,483.66
11 355,483.66 245,420.43 318,579.57
12 318,579.57 286,753.01 277,246.99
13 277,246.99 333,045.50 230,954.50
14 230,954.50 384,893.09 179,106.91
15 179,106.91 442,962.38 121,037.62
16 121,037.62 508,000 56,000

c. Matheson’s Formula

1. A certain type of machine loses 10% of its value each year. The machine costs
P20,000 originally. Make out a schedule showing the yearly depreciation, to the total
depreciation and the book value at the end of year for 5 years.

n BVB d Dn BVE
1 20,000 2,000 2,000 18,000
2 18,000 1,800 3,800 16,200
3 16,200 1,620 5,420 14,580
4 14,580 1,458 6,878 13,122
5 13,122 1,312.20 8,190.20 11,809.8

2. Determine the rate of depreciation, the total depreciation up to the end of the 8th year
and the book value at the end of 8 years for an asset that costs P15,000 new and has
an estimated scrap value of P2,000 at the end of 10 years by declining balance
method.
 n BVB d Dn BVE
1 15,000 2,737.33 2,737.33 12,262.67
2 12,262.67 2,237.80 4,975.12 10,024.88
3 10,024.88 1,829.42 6,804.55 8,195.45
4 8,195.45 1,495.58 8,300.12 6,699.88
5 6,699.88 1,222.65 9,522.77 5,477.23
6 5,477.23 999.53 10,522.31 4,477.69
7 4,477.69 817.13 11,339.43 3,660.57
8 3,660.57 668.01 12,007.44 2,992.56
9 2,992.56 546.11 12,553.55 2,446.45
10 2,446.45 446.45 13,000 2,000

d. Double Declining Balance Method

Determine the rate of depreciation, the total depreciation up to the end of the 8th year and
the book value at the end of 8 years for an asset that costs P15,000 new and has an
estimated scrap value of P2,000 at the end of 10 years by the double declining balance
method.

n BVB d Dn BVE
1 15,000 3,000 3,000 12,000
2 12,000 2,400 5,400 9,600
3 9,600 1,920 7,320 7,680
4 7,680 1,536 8,856 6,144
5 6,144 1,228.80 10,084.80 4,915.20
6 4,915.20 983.04 11,067.84 3,932.16
7 3,932.16 786.43 11,854.27 3,145.73
8 3,145.73 629.15 12,483.42 2,516.58
9 2,516.58 503.32 12,986.73 2,013.27
10 2,013.27 402.65 13,389.39 1,610.61

e. Sum of the Years Digit Method

A structure costs P120,000. It is estimated to have a life of 5 years, with a salvage value
at the end of its life of P1,000. Determine the book value at the end of each year of life.
Use sum-of-the-years’-digit method.
n BVB d Dn BVE
1 120,000 39,666.67 39,666.67 80,333.33
2 80,333.33 31,733.33 71,400 48,600
3 48,600 23,800.00 95,200 24,800
4 24,800 15,866.67 111,066.67 8,933.33
5 8,933.33 7,933.33 119,000 1,000