Mass Depreciation Adjustment Examples
Example 1
Before the adjustment, the accumulated depreciation for each book is as follows:
- Adjusted tax book at beginning of year = 4000
- Adjusted tax book at end of year = 6400
- Corporate book at end of year = 4000
- Control book at end of year = 4300
Oracle Assets calculates the minimum and maximum accumulated depreciation as:
- Minimum = 4300 (control book at end of year)
- Maximum = 6400 (adjusted tax book at end of year)
Oracle Assets calculates the minimum and maximum depreciation expense as:
- Minimum = 300 (control book at end of year)
- Maximum = 2400 (adjusted tax book at end of year)
So, with a depreciation adjustment factor of .5, the adjusted depreciation is:
- Adjusted depreciation expense = 1350
The effect of this adjustment is shown in the following graph of net book value over time.
Example 2
Before the adjustment, the accumulated depreciation for each book is as follows:
- Adjusted tax book at beginning of year = 6400
- Adjusted tax book at end of year = 7840
- Corporate book at end of year = 6000
- Control book at end of year = 6300
Oracle Assets calculates the minimum and maximum accumulated depreciation as:
- Minimum = 6400 (adjusted tax book at beginning of year)
- Maximum = 7840 (adjusted tax book at end of year)
Oracle Assets calculates the minimum and maximum depreciation expense as:
- Minimum = 0 (adjusted tax book at beginning of year)
- Maximum = 1440 (adjusted tax book at end of year)
So, with a depreciation adjustment factor of .75, the adjusted depreciation is:
- Adjusted depreciation expense = 1140
The effect of this adjustment is shown in the following graph of net book value over time.
Example 3
Before the adjustment, the accumulated depreciation for each book is as follows:
- Adjusted tax book at beginning of year = 7840
- Adjusted tax book at end of year = 8704
- Corporate book at end of year = 8000
- Control book at end of year = 9500
Oracle Assets calculates the minimum and maximum accumulated depreciation as:
- Minimum = 9500 (control book at end of year)
- Maximum = 9500 (control book at end of year)
Oracle Assets calculates the minimum and maximum depreciation expense as:
- Minimum = 1660 (control book at end of year)
- Maximum = 1660 (control book at end of year)
Notice that both the minimum and maximum amounts are the control book accumulated depreciation. Since the minimum and maximum depreciation expense are the same, the depreciation adjustment factor has no effect and the adjusted depreciation is:
- Adjusted depreciation expense = 1660
The effect of this adjustment is shown in the following graph of net book value over time.
Example 4
Before the adjustment, the accumulated depreciation for each book is as follows:
- Adjusted tax book at beginning of year = 0
- Adjusted tax book at end of year = 4000
- Corporate book at end of year = 3334
- Control book at end of year = 2300
Oracle Assets calculates the minimum and maximum accumulated depreciation as:
- Minimum = 3334 (corporate book at end of year)
- Maximum = 4000 (adjusted tax book at end of year)
Oracle Assets calculates the minimum and maximum depreciation expense as:
- Minimum = 3334 (corporate book at end of year)
- Maximum = 4000 (adjusted tax book at end of year)
So, with a depreciation adjustment factor of.67, the adjusted depreciation is:
- Adjusted depreciation expense = 3778
Example 5
Before the adjustment, the accumulated depreciation for each book is as follows:
- Adjusted tax book at beginning of year = 6267
- Adjusted tax book at end of year = 7760
- Corporate book at end of year = 7996
- Control book at end of year = 6300
Oracle Assets calculates the minimum and maximum accumulated depreciation as:
- Minimum = 7996 (corporate book at end of year)
- Maximum = 7996 (corporate book at end of year)
Oracle Assets calculates the minimum and maximum depreciation expense as:
- Minimum = 1729 (corporate book at end of year)
- Maximum = 1729 (corporate book at end of year)
Notice that both the minimum and maximum amounts are the corporate book accumulated depreciation. Since the minimum and maximum depreciation expense are the same, the depreciation adjustment factor has no effect and the adjusted depreciation is:
- Adjusted depreciation expense = 1729
Example 6
Before the adjustment, the accumulated depreciation for each book is as follows:
- Adjusted tax book at beginning of year = 7996
- Adjusted tax book at end of year = 8798
- Corporate book at end of year = 9333
- Control book at end of year = 8300
Oracle Assets calculates the minimum and maximum accumulated depreciation as:
- Minimum = 9333 (corporate book at end of year)
- Maximum = 9333 (corporate book at end of year)
Oracle Assets calculates the minimum and maximum depreciation expense as:
- Minimum = 1337 (corporate book at end of year)
- Maximum = 1337 (corporate book at end of year)
Notice that both the minimum and maximum amounts are the corporate book accumulated depreciation. Since the minimum and maximum depreciation expense are the same, the depreciation adjustment factor has no effect and the adjusted depreciation is:
- Adjusted depreciation expense = 1337
The effect of these three adjustments is shown in the following graph of net book value over time.
See Also
Handle Tax Audits
Determine Adjusted Accumulated Depreciation
Adjusting Tax Book Accumulated Depreciation
