To calculate Accelerated Cost Recovery System depreciation

LN uses formulas when it calculates depreciation amounts for assets or its related books. Formulas are part of the depreciation methods assigned to an asset and its related books. These are the formulas used by ACRS depreciation methods in LN:

ACRS Formula Calculations

ACRS formula calculations apply ACRS depreciation to an asset by using the straight line remaining life formula. ACRS depreciation allows assets to be depreciated over periods shorter than their useful lives without regard to salvage value. ACRS applies to assets placed in service after 1980 and before 1987.

ACRS uses the cost of an asset to determine the class to which the asset belongs and the recovery period for the asset.

No other formulas besides straight line remaining life are available for ACRS formula calculations. For more information on straight line remaining life calculations, refer to To calculate Remaining Life depreciation.

Note: If the asset for which you are calculating depreciation contains an averaging convention, LN adjusts the depreciation expense for the first half-year, quarter, or month calculation. For more information, refer to Calculations and Averaging Conventions.

Example of ACRS Formula Calculations

Your company has a stirrer worth $250,000 that was placed in service on May 31, 1985. The asset has a life of 18 years. Management decides to depreciate this asset under the ACRS table method.

LN determines that the appropriate percentage for the first year of the asset's life is 8%. LN calculates an annual depreciation expense of $20,000 for the first year.

ACRS Table Calculations

ACRS Table depreciation uses the rate tables in LN to determine the yearly depreciation percentages for each year in an asset's life. The yearly percentage is applied and the result is then divided across each period in the year to come up with the appropriate depreciation expenses.

ACRS depreciation allows assets to be depreciated over periods shorter than their useful lives without regard to salvage value. ACRS applies to assets placed in service after 1980 and before 1987. ACRS uses the cost of an asset to determine the class to which the asset belongs and the recovery period for the asset. The annual depreciable amount in ACRS is determined by multiplying the cost of the asset by the appropriate percentage for the tax year.

Example of ACRS Table Calculations

Your company has a stirrer worth $250,000 that was placed in service on May 31, 1985 The asset has a life of 18 years. Management decides to depreciate this asset under the ACRS table method.

LN determines that the appropriate percentage for the first year of the asset's life is 8%. LN calculates an annual depreciation expense of $20,000 for the first year.