ASSESSMENT 3

1. A brand-new car costs 500,000P and the salvage value is 10% of the original cost after
20 years. Find the book value of this car after 5 years by straight line method.
(CORREA)
GIVEN:
➢ 𝐶𝑂 = 500,000𝑃
➢ 𝐶𝐿 = 50,000𝑃
➢ 𝐿 = 20 𝑦𝑒𝑎𝑟𝑠
➢ 𝑛=5
REQUIRED:
➢ 𝐶𝑛 =?
SOLUTION:
𝑛
𝐶𝑛 = 𝐶𝑜 − (𝐶 − 𝐶𝐿 )
𝐿 𝑜
5
𝐶𝑛 = 500,000 − (500,000 − 50,000)
20
𝑪𝒏 = 𝟑𝟖𝟕, 𝟓𝟎𝟎. 𝟎𝟎𝑷
2. A generator set costs 500,000P and the salvage value is 10% of the original cost after
20 years, find the depreciation charge per year if money worth 12%. (BELZA)
GIVEN:
➢ 𝐶𝑂 = 500,000𝑃
➢ 𝐶𝐿 = 50,000𝑃
➢ 𝐿 = 20 𝑦𝑒𝑎𝑟𝑠
➢ 𝑖 = 12%
REQUIRED:
➢ 𝑑 =?
SOLUTION:

(𝐶0 − 𝐶𝑙 )𝑖
𝑑=
(1 + 𝑖)𝐿 − 1
(500000 − 50000)0.12
𝑑=
(1 + 0.12)20 − 1
𝒅 = 𝟔, 𝟐𝟒𝟓. 𝟒𝟓𝑷
 3. A car costs 500,000P and the salvage value is 10% of the original cost after 20 years.
Find the depreciation charge at the 8th year by sum of the year’s digit method
(SYDM). (BELZA)
GIVEN:
➢ 𝐶𝑂 = 500,000𝑃
➢ 𝐶𝐿 = 50,000𝑃
➢ 𝐿 = 20 𝑦𝑒𝑎𝑟𝑠
➢ 𝑛=8
REQUIRED:
➢ 𝑑8 = ?
SOLUTION:
2(𝐿 − 𝑛 + 1)
𝑑𝑛 = (𝐶0 − 𝐶𝐿 )
𝐿(𝐿 + 1)
2(20 − 8 + 1)
𝑑8 = (500000 − 50000)
20(20 + 1)
𝒅𝟖 = 𝟐𝟕, 𝟖𝟓𝟕. 𝟏𝟒𝑷
4. A lathe machine cost 650,000P and the salvage value is 65,000P after 20 years, find
the depreciation charge at the 5th year by Matheson’s Formula, (Declining Balance
Method, DBM). (ADRIANO)
GIVEN:
➢ 𝐶𝑂 = 650,000𝑃
➢ 𝐶𝐿 = 65,000𝑃
➢ 𝐿 = 20 𝑦𝑒𝑎𝑟𝑠
➢ 𝑛=2
REQUIRED:
➢ 𝐷𝑛 =?
SOLUTION:
𝑢𝑠𝑒, 𝑑5 = 𝐶𝑜 𝑘(1 − 𝑘)𝑛−1

𝐿 𝑐𝑙
𝑘 = 1− √
𝑐𝑜
 𝑓𝑜𝑟 𝐿 = 20 𝑦𝑒𝑎𝑟𝑠
𝐶𝑜 = 650,000 𝑃
𝐶𝐿 = 65,000 𝑃

20 65,000𝑃
𝑘 = 1 − √650,000𝑃 = 0.1087

ℎ𝑒𝑛𝑐𝑒, 𝑓𝑜 𝑛 = 5
𝑑5 = (650,000)(0.1087)(1 − 0.1087)5−1
𝒅𝟓 = 𝟒𝟒, 𝟓𝟗𝟎. 𝟏𝟎𝟖𝟐𝟕𝑷
5. A pump costs 50,000P and the useful life is 10 years. Find the book value after 8 years
by double declining balance method (DDBM). (CORREA)
GIVEN:
➢ 𝐶𝑂 = 50,000𝑃
➢ 𝐿 = 10 𝑦𝑒𝑎𝑟𝑠
➢ 𝑛=8
REQUIRED:
➢ 𝐶𝑛 =?
SOLUTION:
2 𝑛
𝐶𝑛 = 𝐶𝑜 (1 − )
𝐿
2 8
𝐶𝑛 = 50,000 (1 − )
10
𝑪𝒏 = 𝟖, 𝟑𝟖𝟖. 𝟔𝑷
6. A concrete hollow blocks (CHB) machine cost 40,000P and the salvage value is 4000P
after 6 years. If it can make 108,000 pieces of hollow blocks within the useful life, find
the depreciation charge at the year 1999 if it made 15,000 pieces only. (NALUIS)
GIVEN:
➢ 𝐶𝑂 = 40,000𝑃
➢ 𝐶𝐿 = 4,000𝑃
➢ 𝑇 = 108,000
➢ 𝑇𝑛 = 15,000
REQUIRED:
➢ 𝐷𝑛 =?
SOLUTION:
𝐶𝑂 − 𝐶𝐿
𝐷𝑛 = ( ) (𝑇𝑛 )
𝑇
40,000 − 4,000
𝐷𝑛 = ( ) (15,000)
108,000
𝑫𝒏 = 𝟓, 𝟎𝟎𝟎𝑷
7. A car costs 500,000P and the salvage value is 50,000P after 20 years. Find the book
value after 5 years if money worth 12% per annum. (ADRIANO)
GIVEN:
➢ 𝐶𝑂 = 500,000𝑃
➢ 𝐶𝐿 = 50,000𝑃
➢ 𝐿 = 20 𝑦𝑒𝑎𝑟𝑠
➢ 𝑛=5
➢ 𝑖 = 12% 𝑜𝑟 0.12
REQUIRED:
➢ 𝐷𝑛 =?
SOLUTION:
(1 + 𝑖)𝑛 − 1
𝑢𝑠𝑒, 𝐷𝑛 = (𝐶𝑜 − 𝐶𝑙)
(1 + 𝑖)𝐿 − 1
𝐶𝑛 = 𝐶𝑜 − 𝐷𝑛
𝑓𝑜𝑟 𝐿 = 20 𝑦𝑒𝑎𝑟𝑠
𝐶𝑜 = 500,000𝑃
𝐶𝐿 = 50,000𝑃
𝑖 = 12% 𝑜𝑟 0.12
𝑛=5
(1 + 0.12)5 − 1
𝐷𝑛 = (500,000 − 50,000) = 39676.39701
(1 + 0.12)20 − 1
𝐶5 = 500,000 − 39,676.39701
𝑪𝟓 = 𝟒𝟔𝟎, 𝟑𝟐𝟑. 𝟔𝟎𝟑𝑷
 8. A motor costs 60,000P and the salvage value is 6000P after 10 years. If it was used
for 28,800 hours within the useful life, find its depreciation at the year 1998 if its total
operating hours were 2520. (BELZA)
GIVEN:
➢ 𝐶𝑂 = 60,000𝑃
➢ 𝐶𝐿 = 6,000𝑃
➢ 𝐿 = 10 𝑦𝑒𝑎𝑟𝑠
➢ 𝐻 = 28800 ℎ𝑜𝑢𝑟𝑠
➢ 𝐻𝑛 = 2520 ℎ𝑜𝑢𝑟𝑠
REQUIRED:
➢ 𝐷𝑛 =?
SOLUTION:

𝑑 (𝐶0 − 𝐶𝑙 )
=
ℎ𝑟 𝐻
𝑑 60000 − 6000
=
ℎ𝑟 28800
𝑑 𝑃
= 1.875
ℎ𝑟 ℎ𝑟
𝑑
𝐷𝑛 = (𝐻 )
ℎ𝑟 𝑛
𝐷𝑛 = 1.875(2520)
𝑫𝒏 = 𝟒, 𝟕𝟐𝟓𝑷
9. A tractor costs 800,000P and whose salvage value is 40,000P after 10 years. Find the
total depreciation after 6 years by declining balance method. (BELZA)
GIVEN:
➢ 𝐶𝑂 = 800000𝑃
➢ 𝐶𝐿 = 40000𝑃
➢ 𝐿 = 10 𝑦𝑒𝑎𝑟𝑠
➢ 𝑛=6
REQUIRED:
➢ 𝐷6 =?
SOLUTION:
𝐿 𝐶𝐿
𝑘 = 1− √
𝐶0

10 40000
𝑘 =1− √
800000

𝐾 = 0.2589
𝐷𝑛 = 𝐶0 {1 − (1 − 𝑘)𝑛 }
𝐷6 = (800000){1 − (1 − 0.2589)6 }
𝑫𝟔 = 𝟔𝟔𝟕𝟒𝟓𝟖. 𝟖𝟏𝑷
10. A generator costs 500,000P and whose salvage value is 10,000P after 20 years. Find
the book value after 12 years by sum of the year’s digit method. (CODILAN)
GIVEN:
➢ 𝐶𝑂 = 500,000𝑃
➢ 𝐶𝐿 = 10,000𝑃
➢ 𝐿 = 20 𝑦𝑒𝑎𝑟𝑠
➢ 𝑛 = 12
REQUIRED:
➢ 𝐶𝑛 =?
SOLUTION:

𝑛(2𝐿 − 𝑛 + 1)
𝐷𝐿 = (𝐶0 − 𝐶𝐿 )
𝐿(𝐿 + 1)
12(2(20) − 12 + 1)
𝐷12 = (500000 − 10000)
20(20 + 1)
𝐷12 = 406.000𝑃
𝐶𝑛 = 𝐶0 − 𝐷12
𝐶𝑛 = 500000 − 406000
𝑪𝒏 = 𝟗𝟒𝟎𝟎𝟎 𝑷
 11. A personal computer costs 60,000P and the salvage value is 5000P after 10 years.
Find the book value after 6 years if money worth’s 12% per annum. (ADRIANO)
GIVEN:
➢ 𝐶𝑂 = 60,000𝑃
➢ 𝐶𝐿 = 5,000𝑃
➢ 𝐿 = 10 𝑦𝑒𝑎𝑟𝑠
➢ 𝑛=6
➢ 𝑖 = 12% 𝑜𝑟 0.12
REQUIRED:
➢ 𝐶𝑛 =?
SOLUTION:
(1 + 𝑖)𝑛 − 1
𝑢𝑠𝑒, 𝐷𝑛 = (𝐶𝑜 − 𝐶𝑙)
(1 + 𝑖)𝐿 − 1
𝐶𝑛 = 𝐶𝑜 − 𝐷𝑛
𝑓𝑜𝑟 𝐿 = 10 𝑦𝑒𝑎𝑟𝑠
𝐶𝑜 = 60,000𝑃
𝐶𝐿 = 5,000𝑃
𝑖 = 12% 𝑜𝑟 0.12
𝑛=6
(1 + 0.12)6 − 1
𝐷𝑛 = (60,000 − 5,000) = 25434.04955
(1 + 0.12)10 − 1
𝐶6 = 60,000 − 25434.04955
𝑪𝟔 = 𝟑𝟒𝟓𝟔𝟓. 𝟗𝟓𝟎𝟒𝟓𝑷
12. A car costs 800,000P 4 years ago and the salvage value is 50,000P 6 years from now.
If it is to be replaced by a new one and the trade in value is 450,000P find the sunk
cost if money worth’s 12%. (CODILAN)
GIVEN:
➢ 𝐶𝑂 = 800,000 𝑃
➢ 𝐶𝐿 = 50,000 𝑃
➢ 𝑛 = 4 𝑦𝑒𝑎𝑟𝑠
➢ 𝐿 = 10 𝑦𝑒𝑎𝑟𝑠
➢ 𝑇𝑟𝑎𝑑𝑒 𝑖𝑛 𝑣𝑎𝑙𝑢𝑒 = 450,000 𝑃
➢ 𝑖 = 12%
REQUIRED:
➢ 𝑆𝐶 = ?
SOLUTION:
(1 + 0.12)4 − 1
𝐷4 = (800,000 − 50,000) = 204,259.51 𝑃
(1 + 0.12)10 − 1
𝐶4 = 800,000 − 204,259.51 = 595,740.49
𝑆𝐶 = 𝐶𝑛 − 𝑇𝑟𝑎𝑑𝑒 𝑖𝑛 𝑣𝑎𝑙𝑢𝑒
𝑆𝐶 = 𝐶4 − 450,000 = 595,740.49 − 450,000
𝑺𝑪 = 𝟏𝟒𝟓𝟕𝟒𝟎. 𝟒𝟗 𝑷
13. To develop a timberland containing 2,000,000 trees required an initial investment of
30,000,000P. In a certain year, 400,000 trees were cut off. Find the depletion charge
during the year. (NALUIS)
GIVEN:
➢ 𝐶𝑂 = 30,000,000𝑃
➢ 𝐶𝐿 = 0
➢ 𝑇 = 2,000,000 𝑡𝑟𝑒𝑒𝑠
➢ 𝑆𝑛 = 400,000 𝑡𝑟𝑒𝑒𝑠
REQUIRED:
➢ 𝑑𝑛 =?
SOLUTION:
𝐶𝑂 − 𝐶𝐿
𝑑𝑛 = ( ) (𝑆𝑛 )
𝑇
30,000,000 − 0
𝑑𝑛 = ( ) (400,000)
2,000,000
𝒅𝒏 = 𝟔, 𝟎𝟎𝟎, 𝟎𝟎𝟎𝑷
14. A mining company has a gross income of 32,000,000P per month from the production
of iron core. All expenses, excluding depletion expenses, amount of 26,000,000P per
month. If the fixed depletion rate of iron core is 15%, what is the monthly depletion
allowance? (CODILAN)
GIVEN:
➢ 𝐺𝑟𝑜𝑠𝑠 𝐼𝑛𝑐𝑜𝑚𝑒 = 32𝑀𝑃/𝑚𝑜𝑛𝑡ℎ
➢ 𝐸𝑥𝑝𝑒𝑛𝑠𝑒𝑠 (𝑒𝑥𝑐𝑙𝑢𝑑𝑖𝑛𝑔 𝑑𝑒𝑝𝑙𝑒𝑡𝑖𝑜𝑛 𝑒𝑥𝑝𝑒𝑛𝑠𝑒𝑠) = 26𝑀/𝑚𝑜𝑛𝑡ℎ
 ➢ 𝑑𝑒𝑝𝑙𝑒𝑡𝑖𝑜𝑛 𝑟𝑎𝑡𝑒 = 15%
REQUIRED:
➢ 𝑀𝑜𝑛𝑡ℎ𝑙𝑦 𝑑𝑒𝑝𝑙𝑒𝑡𝑖𝑜𝑛 𝑎𝑙𝑙𝑜𝑤𝑎𝑛𝑐𝑒 = ?
SOLUTION:
𝐺𝑟𝑜𝑠𝑠 𝐼𝑛𝑐𝑜𝑚𝑒
𝑑𝑛 = (0.15)(32,000,000) = 4,800,000 𝑃

𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒
𝑁𝐼 = 𝐺𝐼 − 𝐸𝑥𝑝𝑒𝑛𝑠𝑒𝑠 𝐸𝑥𝑐𝑙𝑢𝑑𝑖𝑛𝑔 𝑑𝑒𝑝𝑙𝑒𝑡𝑖𝑜𝑛
𝑁𝐼 = 32𝑀 − 26𝑀 = 6𝑀
𝑑𝑛 = (0.5)(𝑁𝐼)
𝒅𝒏 = 𝟑𝑴𝑷

15. Ten hectares of timberland will yield an annual profit of 1,000,000P for 10 years, after
which the timber will be exhausted. The land can be sold for 12,000P per hectare. If
the prospective buyer wishes to earn 15% on his investment and can deposit money
in a sinking fund at 8%, determine the maximum price he could pay for the
timberland. (CODILAN)
GIVEN:
➢ 𝐴 = 1𝑀𝑃
➢ 𝐶10 = 120𝑘𝑃
➢ 𝑖 = 8%
➢ 𝑟 = 15%

REQUIRED:
➢ 𝑃 =?
SOLUTION:
(𝑃 − 𝐶𝐿 )𝑖
𝐴 = 𝑃𝑟 +
(1 + 𝑖)𝐿 − 1
(𝑃 − 120𝑘)0.08
1𝑀𝑃 = 𝑃(0.15) +
(1 + 0.08)10 − 1
𝑷 = 𝟒𝟔𝟎𝟑𝟒𝟏𝟒. 𝟓𝟔 𝑷
 16. A machine cost 100,000P and with a useful life of 25 years. Find the book value after
3 years by using double declining balance method. (NALUIS)
GIVEN:
➢ 𝐶𝑂 = 100,000𝑃
➢ 𝑛=3
➢ 𝐿 = 25 𝑦𝑒𝑎𝑟𝑠
REQUIRED:
➢ 𝑑𝑛 =?
SOLUTION:
2 𝑛
𝐶𝑛 = 𝐶𝑂 (1 − )
𝐿
2 3
𝐶3 = 100,000 (1 − )
25
𝑪𝟑 = 𝟕𝟕, 𝟖𝟔𝟖. 𝟖𝑷
17. A machine cost 80,000P and the salvage value is 20,000P after 20 years. Find the book
value after 2 years by using sum of the years digit method. (CORREA)
GIVEN:
➢ 𝐶𝑂 = 80,000𝑃
➢ 𝐶𝐿 = 20,000𝑃
➢ 𝐿 = 20 𝑦𝑒𝑎𝑟𝑠
➢ 𝑛=2
REQUIRED:
➢ 𝐶𝑛 =?
SOLUTION:
𝑛(2𝐿 − 𝑛 + 1)
𝑢𝑠𝑒, 𝐷𝑛 = (𝐶𝑜 − 𝐶𝐿 )
𝐿(𝐿 + 1)
𝐶𝑛 = 𝐶𝑜 − 𝐷𝑛
𝑓𝑜𝑟 𝐿 = 20 𝑦𝑒𝑎𝑟𝑠
𝐶𝑜 = 80,000𝑃
𝐶𝐿 = 20,000𝑃
𝑛=2
 2(2(20) − 2 + 1)
𝐷𝑛 = (80,000 − 20,000) = 11142.85714
20(20 + 1)
𝐶2 = 80,000 − 11142.85714
𝑪𝟐 = 𝟔𝟖, 𝟖𝟓𝟕. 𝟏𝟒𝟐𝟖𝟔𝑷

18. A machine cost 80,000P and the salvage value is 20,000P after 20 years. Find the
constant percentage in the declining book value. (CORREA)
GIVEN:
➢ 𝐶𝑂 = 𝑃80,000
➢ 𝐶𝐿 = 𝑃20,000
➢ 𝐿 = 20 𝑦𝑒𝑎𝑟𝑠
REQUIRED:
➢ 𝑘 =?
SOLUTION:

𝐿 𝐶𝐿
𝑘 = (1 − √ ) 𝑥100
𝐶𝑜

20 20,000
𝑘 = (1 − √ ) 𝑥100
80,000

𝑘 = (0.066967)𝑥100
𝒌 = 𝟔. 𝟔𝟗𝟔𝟕%
19. A machine cost 80,000P and the salvage value is 20,000P after 20 years. Find the
sinking fund factor if interest rate is 8% per year. (ADRIANO)
GIVEN:
➢ 𝐶𝑂 = 80,000𝑃
➢ 𝐶𝐿 = 20,000𝑃
➢ 𝐿 = 20 𝑦𝑒𝑎𝑟𝑠
➢ 𝑖 = 8% 𝑜𝑟 0.08 𝑝𝑒𝑟 𝑦𝑒𝑎𝑟
REQUIRED:
➢ 𝑆𝐹𝐹 =?
SOLUTION:
𝑖
𝑢𝑠𝑒, 𝑆𝐹𝐹 =
(1 + 𝑖)𝐿 − 1
𝑤ℎ𝑒𝑟𝑒, 𝐶𝑜 = 80,000𝑃
𝐶𝐿 = 20,000𝑃
𝐿 = 20 𝑦𝑒𝑎𝑟𝑠
𝑖 = 8% 𝑜𝑟 0.08
ℎ𝑒𝑛𝑐𝑒,
0.08
𝑆𝐹𝐹 =
(1 + 0.08)20 − 1
𝑺𝑭𝑭 = 𝟎. 𝟎𝟐𝟏𝟗
20. A machine cost 80,000P and the salvage value is 20,000P after 20 years. Find the
depreciation charge by sinking fund method if interest rate is 8% per year. (NALUIS)
GIVEN:
➢ 𝐶𝑂 = 80,000𝑃
➢ 𝐶𝐿 = 20,000𝑃
➢ 𝐿 = 20 𝑦𝑒𝑎𝑟𝑠
➢ 𝑖 = 8% 𝑜𝑟 0.08 𝑝𝑒𝑟 𝑦𝑒𝑎𝑟
REQUIRED:
➢ 𝑑 =?
ILLUSTRATION:

𝐶𝑂 − 𝐶𝐿

𝑖 = 8% 𝑜𝑟 0.08 𝑝𝑒𝑟 𝑦𝑒𝑎𝑟

𝑑 =?

SOLUTION:
By sinking fund method,
 (𝐶𝑂 − 𝐶𝐿 )(𝑖)
𝑑=
(1 + 𝑖)𝐿 − 1
(80,000 − 20,000)(0.08)
𝑑=
(1 + 0.08)20 − 1
𝑑 = 1311.132529
𝒅 = 𝟏𝟑𝟏𝟏. 𝟏𝟑𝑷