DEPRECIATION

CHAPTER 6

GROUP 3
Angel Aimie Achacon
Kernsten Bunzo
Sebastian Klair Casunuran
Maria Daniela Festin
Maria Angelica Nichole Foronda
Jan Christoper Gloria
Jan Whils Macatangay
Claude Simon Naco
Vivien Margaret De la Paz
 TABLE
OF CONTENTS

I. Discussion
II. Assessment
III. Application
IV. Evaluation

Discussion about Depreciation

Depreciation

 Depreciation is the decline in the value of an asset overtime.

 An asset is anything you own. Examples are equipment, buildings, tools, machines, vehicles,
furniture, computers, and many more.
 Why does depreciation exist?
 Obsolescence (change in fashion or new inventions)
 Physical diminution (damage)
 Fall in market price
 Effluxion of time (outdated)
 Inadequacy (defects)
 Ways to Solve:
 Straight Line Method
 The most widely used method
 ANNUAL DEPRECIATION= Original Cost-Scrap/Salvage/Trade-in Value
Estimated Useful Life (in years)
 MONTHLY DEPRECIATION= Original Cost-Scrap/Salvage/Trade-in Value
Estimated Useful Life (in months)
Whereas:
ORIGINAL COST or TOTAL COST= cost of an asset; includes freight cost, handling, and set-up cost
SCRAP/SALVAGE/TRADE-IN VALUE= value of the asset at the time it’s worn out
USEFUL LIFE= length of time an asset is expected to be productive

 Depreciation Schedule
 Steps:
1. Identify the total cost and salvage value of the asset. If not given, determine the total cost by adding
the Original Cost, Set-up Charges, and Freight Cost together.
2. Find total depreciation.
3. Calculate annual depreciation.
4. Solve for the Asset Value (Total Cost-Annual Depreciation)
5. Set up the depreciation schedule in the form of a chart with the following heading.
 Necessary Formulas
 Total Depreciation:
Total Cost-Scrap Value
 Depreciation Rate:
Annual Depreciation
Total Depreciation
 Accumulated Depreciation:
Annual Depreciation X Number of Years
 Value after Certain Number of Years:
Total Cost-Accumulated Depreciation

Seatwork in Business Math 8

Exercise 6.1 (p. 109)

1. An appliance, purchased for Php. 65,000, has an estimated useful life of 10 years, and a salvage
value of Php. 8,500. Use the straight line method to compute the annual depreciation, the rate
of depreciation, and construct the depreciation schedule for 10 years.

Php . 65,000−Php . 8,500 Php. 5,650

Annual Depreciation= Depreciation Rate=
10 Php .56,500
¿ Php .5,650=0.1∨10 %
End of Year Annual Accumulated Asset Value
Depreciation Depreciation
0 Php. 65,000
1 Php. 5,650 Php. 5,650 Php. 59,350
2 Php. 5,650 Php. 11,300 Php. 53,700
3 Php. 5,650 Php. 16,950 Php. 48,050
4 Php. 5,650 Php. 22,600 Php. 42,400
5 Php. 5,650 Php. 28,250 Php. 36,750
6 Php. 5,650 Php. 33,900 Php. 31,100
7 Php. 5,650 Php. 39,550 Php. 25,450
8 Php. 5,650 Php. 45,200 Php. 19,800
9 Php. 5,650 Php. 50,850 Php. 14,150
10 Php. 5,650 Php. 56,500 Php. 8,500

2. What is the annual depreciation charge pf a 42” LED TV set, with a regular price of Php. 99,900 if
its estimated trade in value is Php. 15,000 at the end of seven years? Determine the rate of
depreciation and construct the depreciation schedule.

Php . 99,900−Php . 15,000 Php. 12,128.57

Annual Depreciation= Depreciation Rate=
7 Php. 84,900
¿ Php .12,128.57=0.1 4∨14 %
End of Year Annual Accumulated Asset Value
Depreciation Depreciation
0 Php. 99,900
1 Php. 12,128.57 Php. 12,128.57 Php. 87,771.43
2 Php. 12,128.57 Php. 24,257.14 Php. 75,642.86
3 Php. 12,128.57 Php. 36,385.71 Php. 63,514.29
4 Php. 12,128.57 Php. 48,514.28 Php. 51,385.72
5 Php. 12,128.57 Php. 60,642.85 Php. 39,257.15
6 Php. 12,128.57 Php. 72,771.42 Php. 27,128.58
7 Php. 12,128.57 Php. 84,899.99 Php. 15,000.01
3. The ARIC Company has an automobile costing Php. 1,425,000 with an estimated useful life of 15
years and a trade in value of Php. 450,000. Find the annual depreciation, the rate of
depreciation, and construct the depreciation schedule.

Php . 1,425,000−Php . 450,000 Php .65,000

Annual Depreciation= Depreciation Rate=
15 Php .975,000
¿ Php .65,000=0.07∨7 %
End of Year Annual Accumulated Asset Value
Depreciation Depreciation
0 Php. 1,425,000
1 Php. 65,000 Php. 65,000 Php. 1,360,000
2 Php. 65,000 Php. 130,000 Php. 1,295,000
3 Php. 65,000 Php. 195,000 Php. 1,230,000
4 Php. 65,000 Php. 260,000 Php. 1,165,000
5 Php. 65,000 Php. 325,000 Php. 1,100,000
6 Php. 65,000 Php. 390,000 Php. 1,035,000
7 Php. 65,000 Php. 455,000 Php. 970,000
8 Php. 65,000 Php. 520,000 Php. 905,000
9 Php. 65,000 Php. 585,000 Php. 840,000
10 Php. 65,000 Php. 650,000 Php. 775,000
11 Php. 65,000 Php. 715,000 Php. 710,000
12 Php. 65,000 Php. 780,000 Php. 645,000
13 Php. 65,000 Php. 845,000 Php. 580,000
14 Php. 65,000 Php. 910,000 Php. 515,000
15 Php. 65,000 Php. 975,000 Php. 450,000
QUIZ IN BUSINESS MATHEMATICS 8

Name:

Date:

I. Multiple Choice
Encircle the letter of the correct answer.
1. What is the decline in the value of an asset?
A. Depreciation B. Appreciation C. Decline
2. What is the term for anything you own?
A. Equipment B. Asset C. Valuables
3. What is the most used method in depreciation?
A. Value B. Straight Line C. Schedule

II. True or False

Write DPRCTN if the answer is true and FALLS if not.

DPRCTN 1. Even a pencil is an asset.

DPRCTN 2. The estimated useful life refers to the life expectancy of an asset.

FALLS 3. There is a more used method than the straight line method.

III. Problem Solving

1. Archimedes Co. bought a building for Php. 100,050,000. It had a salvage value of Php. 50,000.
The company sold it five years later even if it had a life expectancy of ten years. Find the Annual
Depreciation using the straight line method and make a depreciation schedule. Show your
solution.

Php . 100,050,000−Php .50,000

Annual Depreciation=
10
¿ Php .10,000,000
End of Year Annual Accumulated Asset Value
Depreciation Depreciation
0 Php. 100,050,000
1 Php. 10,000,000 Php. 10,000,000 Php. 90,050,000
2 Php. 10,000,000 Php. 20,000,000 Php. 80,050,000
3 Php. 10,000,000 Php. 300,000,00 Php. 70,050,000
4 Php. 10,000,000 Php. 40,000,000 Php. 60,050,000
5 Php. 10,000,000 Php. 50,000,000 Php. 50,050,000
6 Php. 10,000,000 Php. 60,000,000 Php. 40,050,000
7 Php. 10,000,000 Php. 70,000,000 Php. 30,050,000
8 Php. 10,000,000 Php. 80,000,000 Php. 20,050,000
9 Php. 10,000,000 Php. 90,000,000 Php. 10,050,000
10 Php. 10,000,000 Php. 100,000,000 Php. 50,000
Evaluation for Depreciation (Business Mathematics 8)
Name:___________________________________________

I. Multiple Choice
Encircle the letter of the correct answer.

1. Depreciation is the ______ in the value of an ______ .

a. increase;attribute c. decrease;unowned property
b. decline;asset d. boost;asset

2. Which of the following is an example of the cause of depreciation?

a. damage c. improvement
b. updated d. new

3. The straight line method is the _________ method.

a. least effective c. most important
b. easiest d. most widely used

4. What uses this formula? Annual Depreciation/Total Depreciation

a. depreciation schedule c. depreciation rate
b. asset value d. accumulated depreciation

5. What is the kind of information found on the 3 rd column of a depreciation schedule?

a. accumulated depreciation c. asset value
b. end of year d. annual depreciation

6. What is the accumulated depreciation on the 6 th year of an asset if it had an annual

depreciation of Php. 60,000?
a. Php. 250,000 c. Php. 360,000
b. Php. 300,000 d. Php. 66,000

7. In order to get the asset value, you must _______________________.

a. subtract the accumulated depreciation from the total cost
b. subtract the accumulated depreciation from the total depreciation

8. What do you get when you find the difference of Original Cost and Scrap Value?
a. depreciation rate c. depreciation
b. annual depreciation d. total depreciation

9. What is another term for Scrap Value of Salvage Value?

a. total cost c. trade-in value
b. set-up charges d. freight cost

10. What is the asset value of an asset on the 7 th year if the annual depreciation is Php. 1,000
and the total cost is Php. 150,750 and having an estimated useful life of 10 years?
a. Php. 143,750 c. Php. 143,000
b. Php. 100, 750 d. Php. 150,700
II. Problem Solving
Find the depreciation rate, annual depreciation, and make a depreciation schedule for the following.
Show complete solution. (you may use a separate piece of paper)

1. Bacon Farms bought a pig pen for Php. 170,000. Its salvage value is Php. 20,000 and its
estimated useful life is 10 years.
Php . 170,000−Php .20,000 Php . 15,000
Annual Depreciation= Depreciation Rate=
10 Php . 150,000
¿ Php .15,000=0.1∨10 %
End of Year Annual Accumulated Asset Value
Depreciation Depreciation
0 Php. 170,000
1 Php. 15,000 Php. 15,000 Php. 155,000
2 Php. 15,000 Php. 30,000 Php. 140,000
3 Php. 15,000 Php. 45,000 Php. 125,000
4 Php. 15,000 Php. 60,000 Php. 110,000
5 Php. 15,000 Php. 75,000 Php. 95,000
6 Php. 15,000 Php. 90,000 Php. 80,000
7 Php. 15,000 Php. 105,000 Php. 65,000
8 Php. 15,000 Php. 120,000 Php. 50,000
9 Php. 15,000 Php. 135,000 Php. 35,000
10 Php. 15,000 Php. 150,000 Php. 20,000

2. Apple purchased a lot for a million dollars. It has a salvage value that is half of the original cost
and a life expectancy of 25 years.

Php . 1,000,000−Php .500,000 Php . 20,000

Annual Depreciation= Depreciation Rate=
25 Php . 500,000
¿ Php .20,000=0.04∨4 %
End of Year Annual Accumulated Asset Value
Depreciation Depreciation
0 Php. 1,000,000
1 Php. 20,000 Php. 20,000 Php. 980,000
2 Php. 20,000 Php. 40,000 Php. 960,000
3 Php. 20,000 Php. 60,000 Php. 940,000
4 Php. 20,000 Php. 80,000 Php. 920,000
5 Php. 20,000 Php. 100,000 Php. 900,000
6 Php. 20,000 Php. 120,000 Php. 880,000
7 Php. 20,000 Php. 140,000 Php. 860,000
8 Php. 20,000 Php. 160,000 Php. 840,000
9 Php. 20,000 Php. 180,000 Php. 820,000
10 Php. 20,000 Php. 200,000 Php. 800,000