Enter Unplanned Depreciation
This example illustrates how to enter unplanned depreciation without amortizing the unplanned depreciation amount.
Scenario
To expand its production level, Acme Company buys a new production stamping press machine: press B. During year 2, quarter 4, the old stamping press A has an unexpected failure and stops its production. Stamping press B covers the production gap, producing in a second additional shift for a temporary time.
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 EUR. You choose to not amortize the unplanned amount this period.
Depreciation Results by Quarter
The following table shows quarterly depreciation amounts for the first seven quarters:
|
Year of Life |
Net Book Value (Start of Period) |
Depreciation Expense |
Unplanned Depreciation |
Accumulated Depreciation |
|---|---|---|---|---|
|
Year 1, Quarter 1 |
120,000 EUR |
6,000 EUR |
0 EUR |
6,000 EUR |
|
Year 1, Quarter 2 |
114,000 EUR |
6,000 EUR |
0 EUR |
12,000 EUR |
|
Year 1, Quarter 3 |
108,000 EUR |
6,000 EUR |
0 EUR |
18,000 EUR |
|
Year 1, Quarter 4 |
102,000 EUR |
6,000 EUR |
0 EUR |
24,000 EUR |
|
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 |
After you enter the unplanned depreciation amount in year 2 quarter 4, the stamping press continues to depreciate at the same rate per period, as shown in the following table. This depreciation rate continues until you choose to amortize the unplanned depreciation or make an amortized adjustment.
|
Year of Life |
Net Book Value (Start of Period) |
Depreciation Expense |
Unplanned Depreciation |
Accumulated Depreciation |
|---|---|---|---|---|
|
Year 2, Quarter 4 |
78,000 EUR |
6,000 EUR |
10,000 EUR |
58,000 EUR |
|
Year 3, Quarter 1 |
62,000 EUR |
6,000 EUR |
0 EUR |
64,000 EUR |
|
Year 3, Quarter 2 |
56,000 EUR |
6,000 EUR |
0 EUR |
70,000 EUR |
|
Year 3, Quarter 3 |
50,000 EUR |
6,000 EUR |
0 EUR |
76,000 EUR |
|
Year 3, Quarter 4 |
44,000 EUR |
6,000 EUR |
0 EUR |
82,000 EUR |
|
Year 4, Quarter 1 |
38,000 EUR |
6,000 EUR |
0 EUR |
88,000 EUR |
|
Year 4, Quarter 2 |
32,000 EUR |
6,000 EUR |
0 EUR |
94,000 EUR |
|
Year 4, Quarter 3 |
26,000 EUR |
6,000 EUR |
0 EUR |
100,000 EUR |
|
Year 4, Quarter 4 |
20,000 EUR |
6,000 EUR |
0 EUR |
106,000 EUR |
|
Year 5, Quarter 1 |
14,000 EUR |
6,000 EUR |
0 EUR |
112,000 EUR |
|
Year 5, Quarter 2 |
8,000 EUR |
6,000 EUR |
0 EUR |
118,000 EUR |
|
Year 5, Quarter 3 |
2,000 EUR |
6,000 EUR |
0 EUR |
120,000 EUR |