(1)straight line
Depreciation method; the straight line depreciation method divides the cost by
the life .i.e SL= cost/life
Depreciation method; the straight line depreciation method divides the cost by
the life .i.e SL= cost/life
Example
A desk is purchased for
#487.65,The expected life is 5 years. Calculate the annual depreciation.
#487.65,The expected life is 5 years. Calculate the annual depreciation.
Simply 487.65/5=97.53
Each year for 5 years
#97.53 would be expensed. When there is a scrap value, is calculated as
cost-scrap/numbers of years.
#97.53 would be expensed. When there is a scrap value, is calculated as
cost-scrap/numbers of years.
(2) Reducing Balance
depreciation method ; The reducing balance depreciation method uses the
depreciable basis of an asset multiplied by a factor based on the life of the
asset. The depreciation basis of the asset is the book value of the fixed
asset-cost less accumulated depreciation.
depreciation method ; The reducing balance depreciation method uses the
depreciable basis of an asset multiplied by a factor based on the life of the
asset. The depreciation basis of the asset is the book value of the fixed
asset-cost less accumulated depreciation.
(3)Sum of The Years Digit
The first step is to sum
the digits or numbers starting with the life and going back to one. Example, an
asset with a life of 5 would have a sum of digit as follows.5+4+3+2+1=15, to
find the % for each year, divide the years digit by the sum, in the example
above the percentage would be calculated as follows,
the digits or numbers starting with the life and going back to one. Example, an
asset with a life of 5 would have a sum of digit as follows.5+4+3+2+1=15, to
find the % for each year, divide the years digit by the sum, in the example
above the percentage would be calculated as follows,
Year 1,
5/15 =33.34%
5/15 =33.34%
Year 2,
4/15 =26.67%
4/15 =26.67%
Year 3,
3/15=20%
3/15=20%
Year 4,
4/15=13.33%
4/15=13.33%
Year 5,
5/15=6.67%
5/15=6.67%
EXAMPLE; A table is
purchase for #1,467.89, the expected life is 5 years, since this is a 5 year
asset the yearly factors have been calculated below,
purchase for #1,467.89, the expected life is 5 years, since this is a 5 year
asset the yearly factors have been calculated below,
Year Dep, calculation Dep, expenses
1 1,467.89 *
33.34% 489.40
33.34% 489.40
2 1,467.89 * 26.67% 391.49
3 1,467.89 * 20% 293.58
4 1,467.89 *
13.33% 195.67
13.33% 195.67
5 1,467.89 *
6.67% 97.91
6.67% 97.91
