Depreciation is a reasonable allowance for the exhaustion, wear and tear (including reasonable allowance for

obsolescence) of property used in the trade or business.

Systematic and rational allocation of cost over the useful life on an asset

Equipment Cost ₱ 400,000.00

Transportation Cost ₱ 80,000.00
Installation Cost ₱ 70,000.00
Total Capitalizable Cost ₱ 550,000.00 All cost incurred to bring the asset to its intended use

Salvage/Scrap value ₱ 50,000.00

Estimated Useful Life 5 years P550,000 - 50,000 = P500,000
Date the asset was brought to Depreciable Amt = Capitalizable Cost - Scrap
Jan 1, 20xx, Calendar year
its inteded use Value

Straight Line Method

Depreciable Depreciation Closing Book
Year Openig Book Value Depn Rate *
Amount Expense* Value (net) Depreciable Amount
1 ₱ 550,000 ₱ 500,000 20% ₱ 100,000 ₱ 450,000 Estimated Useful Life
2 ₱ 450,000 ₱ 500,000 20% ₱ 100,000 ₱ 350,000 or
3 ₱ 350,000 ₱ 500,000 20% ₱ 100,000 ₱ 250,000 * Depreciable Amount (X)
4 ₱ 250,000 ₱ 500,000 20% ₱ 100,000 ₱ 150,000 Depreciation Rate
5 ₱ 150,000 ₱ 500,000 20% ₱ 100,000 ₱ 50,000 DR = 1/Estmd Useful Life

Sum of the Years Method

Depreciable Depreciation Closing Book
Year Openig Book Value Depn Rate * Depreciable Amt (X)
Amount Expense* Value (net) Remaing useful life
1 ₱ 550,000 ₱ 500,000 5/15 ₱ 166,667 ₱ 383,333 Sum of the Years
2 ₱ 383,333 ₱ 500,000 4/15 ₱ 133,333 ₱ 250,000
3 ₱ 250,000 ₱ 500,000 3/15 ₱ 100,000 ₱ 150,000 SofTY = n (n+1) / 2
4 ₱ 150,000 ₱ 500,000 2/15 ₱ 66,667 ₱ 83,333
5 ₱ 83,333 ₱ 500,000 1/15 ₱ 33,333 ₱ 50,000

Unit of Production Method

Depreciable Depreciation Closing Book
Year Openig Book Value Depn Rate
Amount Expense* Value (net)
1 ₱ 550,000 ₱ 500,000 300/1000 ₱ 150,000 ₱ 400,000 * Depreciable Amt (X)
2 ₱ 400,000 ₱ 500,000 300/1000 ₱ 150,000 ₱ 250,000 Estmd Yearly Production
3 ₱ 250,000 ₱ 500,000 200/1000 ₱ 100,000 ₱ 150,000 Total Estmd Production
4 ₱ 150,000 ₱ 500,000 100/1000 ₱ 50,000 ₱ 100,000
5 ₱ 100,000 ₱ 500,000 100/1000 ₱ 50,000 ₱ 50,000
Note: DR = Straight Line
Declining Balance Method (200%) / Double Declining Method Rate X 2;
Depreciable Amt = opening
Depreciable Depreciation Closing Book BV, ignore sv for computation
Year Openig Book Value Depn Rate
Amount Expense* Value (net) of Depc'n Exp

1 ₱ 550,000 ₱ 550,000 40% ₱ 220,000 ₱ 330,000 * Opening BV (X)

2 ₱ 330,000 ₱ 330,000 40% ₱ 132,000 ₱ 198,000 Depreciation Rate
3 ₱ 198,000 ₱ 198,000 40% ₱ 79,200 ₱ 118,800
4 ₱ 118,800 ₱ 118,800 40% ₱ 47,520 ₱ 71,280 DR = 1/Estmd Useful
5 ₱ 71,280 ₱ 71,280 40% ₱ 21,280 ₱ 50,000 Life (X) 2