Enter Unplanned Depreciation Amortized Beginning in the Following Period
This example illustrates how to enter unplanned depreciation and begin amortizing the unplanned depreciation amount in the period after entering the unplanned depreciation.
Scenario
To expand its production level, Acme Company buys a new stamping press machine: press B.
Estimated Depreciation
The initial expectation is that stamping press B will be productive for 5 years and will reduce the work of stamping press A. However, the additional effort of covering the production gap increases the depreciation of stamping press B by an estimated 10,000 EUR.
Initially, you set up stamping press B with the following values:
|
Field |
Value |
|---|---|
|
Life span |
5 years |
|
Cost |
120,000 EUR |
|
Depreciation method |
Straight line |
|
Salvage value |
None |
|
Calendar |
Four periods per year |
In year 2, quarter 4 you enter an unplanned depreciation amount of 10,000. You choose to amortize the unplanned depreciation expense over the remaining life of the asset, starting in the period following the unplanned depreciation.
Depreciation Results by Quarter
The depreciation expense per period equals the net book value divided by the remaining periods in the life of the asset.
The asset is fully reserved at the end of the useful life.
The following table shows the quarterly depreciation amounts:
|
Year of Life |
Net Book Value (Start of Period) |
Depreciation Expense |
Unplanned Depreciation |
Accumulated Depreciation |
|---|---|---|---|---|
|
Year 2, Quarter 1 |
96,000 EUR |
6,000 EUR |
0 EUR |
30,000 EUR |
|
Year 2, Quarter 2 |
90,000 EUR |
6,000 EUR |
0 EUR |
36,000 EUR |
|
Year 2, Quarter 3 |
84,000 EUR |
6,000 EUR |
0 EUR |
42,000 EUR |
|
Year 2, Quarter 4 |
78,000 EUR |
6,000 EUR |
10,000 EUR |
58,000 EUR |
|
Year 3, Quarter 1 |
62,000 EUR |
5,167 EUR |
0 EUR |
63,167 EUR |
|
Year 3, Quarter 2 |
56,833 EUR |
5,167 EUR |
0 EUR |
68,334 EUR |
|
Year 3, Quarter 3 |
51,666 EUR |
5,167 EUR |
0 EUR |
73,501 EUR |
|
Year 3, Quarter 4 |
46,499 EUR |
5,166 EUR |
0 EUR |
78,667 EUR |
|
Year 4, Quarter 1 |
41,333 EUR |
5,167 EUR |
0 EUR |
83,834 EUR |
|
Year 4, Quarter 2 |
36,166 EUR |
5,167 EUR |
0 EUR |
89,001 EUR |
|
Year 4, Quarter 3 |
30,999 EUR |
5,167 EUR |
0 EUR |
94,168 EUR |
|
Year 4, Quarter 4 |
25,832 EUR |
5,166 EUR |
0 EUR |
99,334 EUR |
|
Year 5, Quarter 1 |
20,666 EUR |
5,167 EUR |
0 EUR |
104,501 EUR |
|
Year 5, Quarter 2 |
15,499 EUR |
5,167 EUR |
0 EUR |
109,668 EUR |
|
Year 5, Quarter 3 |
10,332 EUR |
5,167 EUR |
0 EUR |
114,835 EUR |
|
Year 5, Quarter 4 |
5,165 EUR |
5,165 EUR |
0 EUR |
120,000 EUR |
Alternate Scenario
Due to a seasonal shortage in production, stamping press B production was reduced. This change is reflected as a reduction in the depreciation of 5,000 EUR.
Analysis
In year 4, quarter 4, you enter another unplanned depreciation amount of -5,000, which partially reverses the previous unplanned depreciation. Oracle Assets amortizes the unplanned depreciation amount from the current period since you chose to amortize the unplanned depreciation from year 2, quarter 4 for the same asset.
Resulting Depreciation by Quarter
The following table shows quarterly depreciation amounts for years 4 and 5:
|
Year of Life |
Net Book Value (Start of Period) |
Depreciation Expense |
Unplanned Depreciation |
Accumulated Depreciation |
|---|---|---|---|---|
|
Year 4, Quarter 1 |
41,333 EUR |
5,167 EUR |
0 EUR |
83,834 EUR |
|
Year 4, Quarter 2 |
36,166 EUR |
5,167 EUR |
0 EUR |
89,001 EUR |
|
Year 4, Quarter 3 |
30,999 EUR |
5,167 EUR |
0 EUR |
94,168 EUR |
|
Year 4, Quarter 4 |
25,832 EUR |
6,166 EUR |
<5,000> EUR |
95,334 EUR |
|
Year 5, Quarter 1 |
24,666 EUR |
6,167 EUR |
0 EUR |
101,501 EUR |
|
Year 5, Quarter 2 |
18,499 EUR |
6,167 EUR |
0 EUR |
107,668 EUR |
|
Year 5, Quarter 3 |
12,332 EUR |
6,167 EUR |
0 EUR |
113,835 EUR |
|
Year 5, Quarter 4 |
6,165 EUR |
6,165 EUR |
0 EUR |
120,000 EUR |