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DEPRECIATION
Engr. Charity Hope Gayatin
1
Depreciation Terminologies Depreciation Terminologies
Depreciation Depreciation
TYPES OF DEPRECIATION
2
Depreciation Methods Problem
2. SINKING FUND
assumes that the funds will accumulate for
replacement
d = ( CO CL ) / (F/A, i%, L) 2. A firm bought equipment for P560,000. Other
Dn = d ( F/A, i%, n) expenses including installation amounted to
Cn = CO Dn P4000. The equipment is expected to have a life
where of 16years with a salvage value of 10% of the
d - annual cost of depreciation original cost of the equipment. Determine the
L - useful life of the property in years book value at the end of 12years by sinking fund
CO - original cost method at 12% interest.
CL - value at the end of life, scrap value
Cn - book value at the end of n years
Dn - depreciation up to age n years
3
Problem Depreciation Methods
5. SUM OF THE YEARS DIGIT METHOD
assumes that the funds will accumulate for
replacement
4. Determine the rate of depreciation, the total
dn = (Reverse Digit/Sum of Digit) * (CO CL)
depreciation up to the end of the 8th year and
dn = (depreciation factor) * (total depreciation)
the book value at the end of 8 years for an asset
where
that costs P15,000 new and has an estimated
dn - depreciation charge during the nth year
scrap value of P2,000 at the end of 10 years by
L - useful life of the property in years
(a) the declining balance method and (b) the
CO - original cost
double declining balance method.
CL - value at the end of life, scrap value
Cn - book value at the end of n years
Dn - depreciation up to age n years
Problem