Sum of the Years' Digits
Yearly Sum of the Years' Digits depreciation is calculated using the following formula:
(( Remaining Years of Life / Sum of Years Remaining) x NBV) x % of Year to Depreciate
Sum of the Years Digits Example
The following table shows data that is used in the depreciation example that follows it.
| Attributes | Data |
|---|---|
|
Asset Cost |
3700.00 |
|
Salvage Value |
100.00 |
|
Asset Basis |
3600.00 |
|
Life |
36 periods (3 years) |
|
Begin Depr Dt. |
07/01/2006 |
Depreciation Results
The following table shows yearly depreciation and the calculation that is used to produce the result.
| Year | Depreciation Calculation | Depreciation Expense |
|---|---|---|
|
2006 |
3600 x (3/(1+2+3)) x (6/12) |
= 900.00 |
|
2007 |
2700 x (2.5/(1+2+3/2)) x (12/12) |
= 1500.00 |
|
2008 |
1200 x (1.5/(1+ 2/2)) x (12/12) |
= 900.00 |
|
2009 |
300 x (0.5/(1/2)) x (6/6) |
= 300.00 |
Calculation for the first year Sum of Years Remaining = 3/(1+2+3)
Units of Production
Units of production depreciation differs from other methods in that it does not depreciate an asset based on its periods of life, but rather on its production detail. In this method, an asset is assumed to have a fixed lifetime production capacity—a maximum number of units it can produce. Thus, a fixed amount of depreciation is allotted to each unit of production. The net book value of the asset is then multiplied by the number of units that are produced in a period over the remaining units to be produced to determine how much depreciation to take for that period.
NBV x (Units Produced / Units Remaining)
Production detail for the asset is entered into the Units of Production table Each time new detail is added to this table, open transactions are created for each asset that is associated with it. You should recalculate depreciation each time you add to or change the detail in the Units of Production table.
Units of Production Example
The following table shows data that is used in the depreciation example that follows it.
| Attributes | Data |
|---|---|
|
Asset Cost |
10,000.00 USD |
|
Total Estimated Production Units |
40,000 |
|
Production Units for each month |
10,000 |
Depreciation Results
The following table shows yearly and monthly depreciation and the calculation that is used to produce the result.
| Year, Month | Depreciation Calculation | Depreciation Expense |
|---|---|---|
|
Year 1, Month 1 |
10,000 x (10,000/40,000) |
= 2500.00 |
|
Year 1, Month 2 |
7500 x (10,000/30,000) |
= 2500.00 |
|
Year 1, Month 3 |
5000 x (10,000/20,000) |
= 2500.00 |
|
Year 1, Month 4 |
2500 x (10,000/10,000) |
= 2500.00 |
Note:
Units remaining are calculated by summing the production units for all remaining periods that are set up on the Units of Production page