AMORTIZATION,

SINKING FUND
AND
DEPRECIATION
PROBLEM

AMORTIZATION PROBLEM:
A

400,000 loan at 10% compounded

semi-annually is to be amortized
every 6 months for 8 years. Find the
semi annual payment and construct
the amortization schedule table.

GIVEN:
A= 400,000 m=2 r= 10%
8 years

A. Find the periodic payment

R=

Ai
1-(1+i)^-n

i = r/m

n= t x m

i= 10% / 2
= 0.05

n= 8 x 2
= 16

R= 400,000 (0.05)
1-(1+0.05)^-16

R = 36,907.96

B. Amortization Schedule
Interest = Unpaid Balance x i
Principal Repaid = Periodic payment Interest

Unpaid Balance = Previous Unpaid Balance Principal Repaid

PERIOD

Unpaid
Balance

Interest

Periodic
Payment

Principal
Repaid

400,000

20,000

36,907.96

16,907.96

383,092.04

19,154.60

36,907.96

17,753.36

365,338.68

18,266.93

36,907.96

18,641.03

346,697.65

17,334.88

36,907.96

19,573.08

327,124.57

16,356.23

36,907.96

20,551.73

306,572.84

15,328.64

36,907.96

21,579.32

284,993.52

14,249.68

36,907.96

22,658.29

Period

Unpaid
Balance

Interest

Periodic
Payment

Principal
Repaid

262,335.23

13,116.76

36,907.96

23,791.20

238,544.03

11,927.20

36,907.96

24,980.76

10

213,563.27

10,678.16

36,907.96

26,229.80

11

187,333.47

9,366.67

36,907.96

27,541.29

12

159,792.18

7,989.61

36,907.96

28,918.35

13

130,873.83

6,543.69

36,907.96

30,354.27

14

100,509.56

5,025.48

36,907.96

31,882.49

15

68,627.07

3,431.35

36,907.96

33,476.61

16

35,150.46

1,757.52

36,907.96

35,150.44

TOTAL

190,527.40 590,527.40 400,000

Sinking Fund Problem:

The sum of 40,000 will be needed at the
end of 8 years. If money can be invested at
10% converted annually . Find the annual
deposit and create a sinking fund
schedule.
GIVEN:

S= 40,000 m= 1
8 YEARS

J= 10%

A. FIND THE ANNUAL DEPOSIT

R=

JxS
m((1+J/m)^n-1)

R=

0.10 x 40,000
1((1+0.10/1)^8-1)

R = 3,497.76

n= t x m
n= 8 x 1
=8

B. Sinking Fund Schedule

Interest = Amount in Fund x i
Increased = Deposit + Interest

Amount in Fund = Previous Amt. in Fund + Increased

PERIOD

DEPOSIT

INTEREST

INCREASED

AMT. IN FUND

3,497.76

3,497.76

3,497.76

3,497.76

349.76

3,847.54

7,345.30

3,497.76

734.53

4,232.29

11,577.59

3,497.76

1,157.76

4,655.52

16,233.11

3,497.76

1,623.31

5,121.07

21,354.18

3,497.76

2,135.42

5,633.18

26,987.36

3,497.76

2,698.74

6,196.50

33,183.86

3,497.76

3,318.39

6,816.15

40,000.00

TOTAL

27,982.32

12,017.91

40,000

DEPRECIATION PROBLEM:
An equipment worth 10,000 has a scrap
value of 2000 and has a useful life of 8
years. Find the book value after 6 years
and construct a depreciation schedule.
GIVEN:
O = 10,000 S = 2000 n= 8 years

WEARING VALUE

PERIODIC
DEPRECIATION
W=0-S
R = W/n
W = 10,000 - 2,000
R = 8,000/8
W = 8,000
R = 1,000
BOOK VALUE AFTER 6 YEARS:
BV = O (R x n)
BV = 10,000 (1,000 X 6)
BV = 4,000

Depreciation Schedule:
Accumulated Dep. = Previous Accum. Dep. + Annual Dep.
Book Value = Previous Book Value Annual Dep.
YEAR

Annual
Depreciation

Accumulated
Depreciation

BOOK VALUE

10,000

1,000

1,000

9,000

1,000

2,000

8,000

1,000

3,000

7,000

1,000

4,000

6,000

1,000

5,000

5,000

1,000

6,000

4,000

1,000

7,000

3,000

1,000

8,000

2,000

THE END

A-131
AGUILON, CLARE ANN
CARBUNGCO, KRISSIE
CASTRO, RIO KATRINA
FERMIN, JAN JONAH
GARCIA, BIEN

MRS. MA. ESPERANZA S. MALANG