Depreciation Calculations

This topic describes depreciation calculations and provides examples.

Key

Refer to this key when reviewing the calculations:

  • c-amt = Current depreciation
  • t-amt = Total value of the asset
  • s-amt = Salvage value
  • d-amt = Accumulated depreciation + bonus depreciation
  • k = The current year's digit
  • p-amt = Percent amount (calculated)
  • perds = Number of accounting periods
  • fadepr.bonus-depr-$ = Bonus depreciation amount
  • fadeptab.percent-yr[k] = The percent of the asset value to be depreciated in year 'k'

Salvage Value

If you enter a salvage value on the Fixed Asset Depreciation form, all depreciation schedules (columns) for that asset use that value. This occurs when the system determines the amount of depreciation necessary to reduce the carrying value of the asset to the estimated residual value (salvage value) during the last year of its useful life.

After each depreciation method, this equation occurs:

If c-amt > t-amt - s-amt - d-amt

Then c-amt = t-amt - s-amt - d-amt

Salvage Value - Bonus Depreciation

For Fixed Asset Depreciation Table methods, if you are considering salvage value, you must enter it in the Bonus Depr field of the depreciation schedule (column) using that method. You only use the amount in the Salvage Value field for calculating the depreciation amount during the last year of the asset's useful life.

The equation is:

c-amt = (t-amt - facepr.bonus-depr-$)*fadeptab.percent-yr[k]*.01

Bonus Depreciation

To use bonus depreciation correctly, you must use a Depreciation Table method. Most methods do not consider bonus depreciation until the equation:

If c-amt > t-amt - s-amt - d-amt

Then c-amt = t-amt - s-amt - d-amt

c-amt = (t-amt - fadepr.bonus-depr-$) * fadeptab.percent-yr[k] * .01.

If c-amt > t-amt - s-amt - d-amt

Then c-amt = t-amt - s-amt - d-amt

(t-amt - fadepr.xxx - fadepr.bonus-depr-$)

d-amt = accumulated depreciation and bonus depreciation.

Sum of the Year's Digits

When using the Sum-of-the-Year's Digits depreciation method, the system uses this equation:

c-amt = (t-amt - s-amt) * k / sum-of-yrs.

If c-amt > t-amt - s-amt - d-amt

Then c-amt = t-amt - s-amt - d-amt

Period Basis Using Declining Balance

When depreciating on a period basis using the Declining Balance methods, the system uses this equation:

c-amt = (t-amt - d-amt) * p-amt * (1 / (t-units / perds)) / perds

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