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?
SOLUTION:
S=50,000
P=480,000
L=10 years

P−S
d=
L
480,000−50,000
d=
10
d=P 43,000 per year
Answer: P43,000.00 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?
SOLUTION:
S=10,000
P=50,000
L=10 years
n=5 years

P−S
d=
L
50,000−10,000
d=
10
d=P 4,000

4000 ( 5 ) =20,000
BV 5=50,000−20,000
BV 5=P30,000.0 0
Answer: 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?
SOLUTION:
S=100,000
P=50 0 , 000
L=25 years
P−S
d=
L
 5 0 0,000−10 0 ,000
d=
25
d=P 16,000

D n=16,000∗3
D n=P 48,000.00
Answer: 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.
SOLUTION:
S=10,000
P=1 00,000
L=10 years
n=5 years
P−S
d=
L
1 00,000−10,000
d=
10
d=P 9,000
9000 ( 5 )=45,000
BV 5=10 0,000−45 , 000
BV 5=P55 , 000.0 0
Answer: 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.
SOLUTION:
S=2,500
P=45,000
L=5 years

P−S
d=
L
45,000−2,5 00
d=
5
d=P 8,500

d
k=
P
 8500
k=
45,000
k =0.1888∗100
k =18.89 %
Answer: 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.

SOLUTION:
S=13 % ( 120,000 )=15,600
P=1 2 0,000
L=1 2 years
n=8 years

P−S
d=
L
1 2 0,000−1 5 ,6 00
d=
12
d=P 8 , 7 00

8700 ( 8 ) =69,600
P−D n=12 0,000−69,600
P−D n=P50,400.0 0
Answer: 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?
SOLUTION:
S=50,000−15,000=35,000
P=80 0,000
L=1 0 years
n=6 years

P−S
d=
L
800,000−35,000
d=
10
d=P 76,500
 D n=76500 (6)
D n=459,000
D V 6 =800,000−459,000
D V 6 =P341,000.00

Answer: P76,500.00; 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?
SOLUTION:
S=1,000,000
P=2,000,000
L=50 years
a.
P−S
d=
L
P=dL+ S
P=50 ¿
P=101,000,000
b.
D n=25(2∗1,000,000)
D n=50,000,000
D V 25=P−Dn
D V 25=101,000,000−50,000,00
D V 25=P 51,000,000.00
c.
D n=d n
30∗1,000,000=2,000,000( n)
n=15 years
Answer: P101M; P51M; year 15
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 Depreciation Book value at the

Charge Per Year at the end of the year end 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?
SOLUTION:
S=2,000
P=2 0,000
i=2
L=10
d=P−S
(( i
1+i )
10
−1
]
d=20,000−2,000
(( 0.02
1+0.02 )
10
−1
]
d=P 1643.88
Answer: P1643.88
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.
SOLUTION:
S=4,500
P=40,000+1500+1000=42,500
i=6.5 %
L=8
n=4
a.

D n=P−S
( ( 1+i )n−1
( 1+i )L −1 )
D n=42,500−4,500
(
( 1+0.65 )4 −1
( 1+0.65 )8 −1 )
D n=16,619.53
b.

D n=P−S
(
( 1+i )6−1
( 1+i )2−1 )
D n=26,637.44
BV 6=P−Dn
BV 6=42,500−26,637.44
BV 6=15,862.56
 Answer: P16,619.53; P15.862.56
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%.
SOLUTION:
S=10,000
P=75,000
i=5 %
L=8
d=P−S
( i
( 1+i )L
−1
]
d=75,000−10,000
( 0.05
( 1+0.05 )8
−1
]
d=6,806.92

Answer: P6806.92
13. EE Board Exam May 2003
The original cost of a certain piece of equipment is P150,000.00 and its 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.
SOLUTION:
P=150,000
l=10 %
i=10 %
P−S
d=
L
150,000−S
14,000=
10

S=10,000
d=P−S
(( i
1+i )L
−1
]
d=150,000−10,000
(( 0.10
1.10 )
10
−1
]
d=8,784.36
Answer: P8784.36
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.
SOLUTION:
 P=75,000
L=10
i=7 %
BV 5=45,864.31

D 5=P−B V 5
D 5=75,000−45,864.31
D 5=29,135.69

D n=P−S
( ( 1+i )n−1
( 1+i )L −1 )
29,135.69=75,000−S
( 1+0.07 )5 −1
(
( 1 .07 )10 −1 )
S=P 5,000.00
Answer: P5000.00
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.
SOLUTION:
S=165,000
P=650,000
BV 3=421,750.00
n=3 years

D 3=650,000−421,750
D 3=228,250

D 3=P−S
(
( 1+i )n−1
( 1+ i )L −1 )
228,250=450,000−165,000
( (1+i )3−1
( 1+i )6−1 )
i=0.04∨4 %
Answer: 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.
SOLUTION:
P=60,000
BV 8=4 , 000
n=8 years
 n
BV n=P (1−k )
4,000=6,000(1−k )8
k =0.2872∨28.72 %
Answer: 28.72%
17. ECE Board Exam April 2000
A machine costing P1000,000.00 depreciates at 10% annually. What is its book value after 5
years?
SOLUTION:
P=100,000
k =0.10
n=5 years

n
BV 5=P( 1−k )
5
BV 5=100,000(1−0,10)
BV 5=P 59,049.00
Answer: 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?
SOLUTION:
P=400
k =10 %
n=5 years
n
BV 5=P( 1−k )
5
BV 5=400(1−0.10)
BV 5=P 236.20

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.
SOLUTION:
S=120,000∗13 %=15,600
P=120,000
L=12
n=8 years

S 1
k =1−( ) L
P
 1
15,600 12
k =1−( )
120,000
k =0.1564
n
BV 8=P (1−k )
8
BV 8=120,000 (1−0.1 564)
BV 8=P 30,794.76
Answer: 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
SOLUTION:
S=8,009
P=80,000
BV 3=33,750
1
BV 3 3
k =1−( )
P
1
33,750 3
k =1−( )
80,000
k =0.25∨25 %
L
S=P (1−k )
L
8009=80,000(1−0.25)
L=8 years
Answer: 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.
SOLUTION:

Year Depreciation Charge Accumulated Book value at the

per year (d n ) Depreciation at the end of the year ( BVn
end of the year ( D n) )
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

Answer: P61,015.63; P10,678.71

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%?

SOLUTION:

P=60,000
L=8 years
k =28.72 %

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

D n=P−S
D n=60,000−3998.46
D n=P 56,001.54

Answer: P56,000.00

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?
SOLUTION:
P=200,000
L=10 years
S=25,000

8
2
BV 8=P (1− )
10
8
2
BV 8=200,000(1− )
10
BV 8=P 33,554.0 0

Answer: P33,554.00
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.
SOLUTION:

Year Depreciation Charge Accumulated Book value at the

per year (d n ) Depreciation at the end of the year ( BVn)
end of the year ( D n)
 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

Answer: P91,059.94; P11,457.57

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.
SOLUTION:
S=12,000
P=120,000
L=10 years
n=1
10(10+1)
y= =55
2

d n=P−S ( L−n+
y )
1

d n=120,000−12,000 ( 10−1+1
55 )
d n=19,637.00
Answer: P19,637.00
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.
SOLUTION:
P=9,000
L=10 years
S=1,000
10(10+1)
y= =55
2

D n=P−S ( L−n+1
y )
 D n=9,000−1,000 ( 10+ 9
55 )
D n=2,763.64
P−D n=9,000−2,763.64
BV 8=6236.00
Answer: P6236.00
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 20 th year, what is the depreciation in the third year? Use sum-of-
the-year’s digits depreciation.
SOLUTION:
P=10,000
L=20 years
S=0
y=210

D n=P−S ( ( L−n+1) +( L−n+1)

y
1 +( L−n+1)
)
2 3

D 3=10,000 ( 210
18
)
D 3=P 857.1 4
Answer: P857.00
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?
SOLUTION:
P=500,000
L=5
d 1=100,000
5(5+1)
y=
2
y=15
d 1=P−S
L
y()
100,000=500,000−S ( 155 )
S=200,000.00
Answer: P200,000.00
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.
SOLUTION:
S=0
d n <0.2 P

d 1=P−S ( Ly )
( )
L
0.2 P=P−0
L ( L+1 )
2

0.2= ( L+2 1 )
L=9 years
Answer: 9 years
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.
SOLUTION:
P=540,000
S=40,000
L=7
BV 4 =?
d y =?
y=28
Year Depreciation Charge Accumulated Book value at the
per year (d n ) Depreciation at the end of the year ( BVn)
end of the year ( 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

Answer: P147,142.86; P17,857.14

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.
SOLUTION:
P=6,240,000
S=4 99,200
L=10
10(10+1)
y=
2
y=55

d n=P−S ( L−n+
y )
1

d n=6,240,000−499,200 ( 10−5+1
55 )
d n=626,269.10
Answer: P626,269.10
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.
SOLUTION:
P=230,500
S=25,000
P0 L=300,000
P0 1=5 0,000
P0 2=75 , 000

P−S
d=
P0L
230,500−25,000
d=
300,000

d=0.685

P−BVn
d=
P0

230,500−B Vn
0.685=
50,000+75,000
BVn=P 144,875.00
Answer: P144,875.00
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.
SOLUTION:
P=680,000
S=120,000
a.
P−S
d 3=P 03
P0 L
680,000−120,000
d 3=48,000
320,000
d 3=84,000
b.
680,000−120,000
D 3=(40,000+55,000+ 48,000)
320,000
D 3=250,250
P−D 3 =680,000−250,250
BV 3=P 429,750
Answer: P84,000.00; P429,750.00

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
D n=105,714
i=1 2 %

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

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

105,714 ≠ 45,593.52

D n=P−S ( L−n+1
y )

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

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.
SOLUTION:
P1=20,500,000
S1=2,000,000
L1=15 years

D n=20,500,000−2,000,000 ( 15+14+ 13+12+

120
11+10+ 9+8
)
D n=14,183,333.33

1 5(15+ 1)
y=
2
y=120
BV 8=P−Dn
BV 8=20,500,000−14,183,333.33
BV 8=6,316,666.67

BV 15=6,316,666.67−6,313,461.54
BV 15=P 4,003,205.13

Answer: P4,003,205.13
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.
SOLUTION:
P1=984,000
S1=81,000
L1=7 years

( )
1
S1 L1
k =1−
P1

( )
1
81,000
k =1− 7
984,000
k =0.30

5
BV 5=984,000(1−0.30)
BV 5=165,380.88

P2=BV 5 +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

d n=P (1−k )n−1 k

d n=415,380.88 ( 1−0.2788 )2 (0.2788)
d n=P 60,239.15

3
BV 3=415,380.88(1−0.2789)
BV 3=155,751.77
Answer: P60,240.15; P155,756.89
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.
SOLUTION:
P1=3,800,000
n1 =10
 L1=¿ 20 years

( )
10
2
BV 10=P 1−
30

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

P2=1,906,124.94+ 1,700,000
P2=3,606,124.9 4

( )
2
2
BV 10=3,606,124.94 1−
20
BV 10=P 1,257,378.02

Answer: 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.
SOLUTION:
P1=50,000
S1=3,800
L1=12 years
n=6
y=78

D n=P−S ( 12+11+y10+9+8 )
D =50,000−3,800 ( )
12+11+10+9+8
n
78
D n=29,615.38

BV 5=P−Dn
BV 5=50,000−29,615.38
BV 5=20,384.62

P2=BV 5 =20,384.62
S2=2500
L2=4 years
y=10

D n=P−S ( L+3y )
D n=20,384.62−2500 ( 410+3 )
D n=12,519.23
BV 2=P−Dn
BV 2=20,384.62−12,519.23
BV 2=P 7,865.39
Answer: P7865.40