Академический Документы
Профессиональный Документы
Культура Документы
Capital intact
StraightLine Method
Service Hour Method
Production Units Method
Annuity Method
A. Straight-Line-Method
It spr ea ds depreci atio n
evenl y over the usef ul l ife of
the asset. It assumes tha t
depreci atio n is in proporti on
to ti me.
= 20 0, 000 – [ ( 200,0 00
-10 ,000) x 3 ]
8
= P1 28,75 0
B) BV = O – (Rt )
= 20 0, 000 – [ ( 200,0 00
-10 ,000) x 5 ]
8
B. Service Hours Method
Similar to the Straight-Line Method
except that it calculates “book value”
based on the hours an object has been
used. It assumes that the number of
productive hours decreases as the
property becomes older.
Formula: a) R = (O - S) ÷ n
b) RE = SH x R
Example 1
A sewing machine purchased for P4500 has an
estimated life of four years and a scrap value of
P300. Use the straight line method to find the
depreciation. Assume that the useful life of the
machine is estimated to be 15,000 service hours
and the actual number of hours spent in
production each year is as follows:
1st yr: 4,500 hrs 2nd yr: 4,100 hrs
3rd yr: 3,500 hrs 4th yr: 2,900 hrs
• Solution to Ex 1
R = O – S = 4,500 = 0.28 per hour
n 15,000
An nua l D epr eciati on E xpens e:
RE = SH x R
1st yr RE = 4,500 x 0.28 = 1,260
2nd yr RE = 4,100 x 0.28 = 1,148
3rd yr RE = 3,500 x 0.28 = 980
4th yr RE = 2,900 x 0.28 = 812
DEPRECIATION SCHEDULE – SERVICE HOURS METHOD
Annual Depreciation:
1st yr P6,900 (2,800 ÷ 25,000) = P 772.80
2nd yr 6,900 (3,200 ÷ 25,000) = 883.20
3rd yr 6,900 (4,100 ÷ 25,000) = 1,131.60
4th yr 6,900 (5,500 ÷ 25,000) = 1,518.00
5th yr 6,900 (2,500 ÷ 25,000) = 690.00
• Depreciation Schedule
Annu al Accu mulate d
Boo k
Yr Depr ec iation D epr eci ati on
Val ue
0 0 0 P7,500
5 P 772.80 P 772.80 6,727.20
6 883.20 1,656.00 5,844.00
7 1,131.60 2,787.60 4,712.40
8 1,518.00 4,305.60 3,194.40
Example 2
A cer tain machine co st s P 12 ,8 00
depre cia tes t o P 1, 200. T his t ype o f
mach ine h as an e st im ated oper ating
lif e of 3 5,5 00 h rs, a nd run as f ollows :
1st yr - 3,400 hrs 2nd yr - 3,800 hrs
3rd yr - 4,350 hrs 4th yr - 5,160 hrs
5th yr - 4,995 hrs 6th yr - 7,200 hrs
7th yr - 1,500 hrs
*Prepare a depreciation table.
• Sol: W=O–S
= P12,800 – P1,200 = P11,600
Annual Depreciation:
1st yr P11,600 (3,400÷35,500) = P1,110.99
2nd yr 11,600 (3,800÷35,500) = 1,241.69
3rd yr 11,600 (4,350÷35,500) = 1,421.41
4th yr 11,600 (5,160÷35,500) = 1,686.08
5th yr 11,600 (4,995÷35,500) = 1,632.17
6th yr 11,600 (7,200÷35,500) = 2,352.68
7th yr 11,600 (1,500÷35,500) = 490.14
• Depreciation Schedule
Annual Total Book
Yr Depreciation Depreciation Value
0 0 0 P12,800
1 P1,110.99P1,110.99 11,689.01
2 1,241.69 2,352.68 10,447.32
3 1,421.41 3,774.09 9,025.91
4 1,686.08 5,460.17 7,339.83
5 1,632.17 7,092.34 5,707.66
6 2,352.68 9,445.02 3,354.98
7 490.14 9,935.16 2,864.84
Try It Yourself!!!
D. Annuity Method
The depreciation charge is composed
of the amount credited to the fund and
the interest on the book value of the
asset.
The investment in the asset is
regarded, first, as the amount of the
salvage value which earns interest, and
second, an investment in an annuity to
be equal to the periodic payments.
“compound interest method of
depreciation”