1. LESSON 8-4 Other Methods of Depreciation
5/28/2018
LESSON 8-4
Other Methods of Depreciation
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2. DECLINING-BALANCE METHOD OF DEPRECIATION
page 242
Plant asset: Computer
Depreciation method: Declining balance
Original cost: $2,000.00
Estimated salvage value: $175.00
Estimated useful life: 5 years
Year
Beginning Book Value
Declining- Balance Rate
Annual Depreciation
Ending
Book Value 1 2 3 4 5
Total Depreciation
$2, ,200.00
720.00
432.00
259.20
40% — $
480.00
288.00
172.80
84.20
$1,825.00
$1,200.00
175.00 1 2
1. Calculate the declining-balance rate.
Total Depreciation Expense %
 Estimated Useful Life (years)  5
= Straight-Line Rate %
 Double the Rate  2
= Declining-Balance Rate %
2. Calculate the annual depreciation for year 3.
Beginning Book Value $720
 Depreciation Rate  40%
= Annual Depreciation Expense $288
LESSON 8-4

3. SUM-OF-THE-YEARS-DIGITS METHOD OF DEPRECIATION
page 243
Plant asset: Computer
Depreciation method: Sum-of-the-years-digits
Original cost: $2,000.00
Estimated salvage value: $175.00
Estimated useful life: 5 years
Year
Beginning Book Value
Fraction
Total Depreciation
Annual Depreciation
Ending
Book Value 1 2 3 4 5
Total
$2,000.00
1,391.67
905.00
540.00
296.67
5/15
4/15
3/15
2/15
1/15
$1,825.00
$608.33
486.67
365.00
243.33
121.67
$1,391.67
175.00 1 2
1. Calculate the fraction.
Years’ Digits Fraction
1 5/15
2 4/15
3 3/15
4 2/15
5 1/15 15
2. Calculate the annual depreciation for year 1.
Original Cost $2,000.00
Estimated Salvage Value –
Estimated Total Depreciation $1,825.00
Year’s Fraction  5/15
Annual Depreciation $608.33
LESSON 8-4

4. COMPARISON OF THREE METHODS OF DEPRECIATION
page 244
Plant asset: Computer
Depreciation method: Comparison
Original cost: $2,000.00
Estimated salvage value: $175.00
Estimated useful life: 5 years
Year
Straight-Line Method
Double Declining-Balance Method
Sum-of-the-Years-Digits Method 1 2 3 4 5
Total Depreciation
$365.00
365.00
$1,825.00 $
480.00
288.00
172.80
84.20
$608.33
486.67
243.33
121.67
LESSON 8-4

5. PRODUCTION-UNIT METHOD OF DEPRECIATION
page 245
Plant asset: Truck
Depreciation method: Production-unit
Original cost: $18,200.00
Estimated salvage value: $2,000.00
Estimated total depreciation: $16,200.00
Estimated useful life: 90,000 miles
Depreciation rate: $0.18 per mile driven
Year
Beginning Book Value
Miles Driven
Annual Depreciation
Ending
Book Value 1 2 3 4 5
Totals
$18,200.00
16,580.00
12,440.00
7,940.00
3,980.20
9,000
23,000
25,000
22,000
8,000
87,000
$ 1,620.00
4,140.00
4,500.00
3,960.00
1,440.00
$15,600.00
$16,580.00
2,540.00 1 2
1. Calculate the depreciation rate.
Original Cost $18,200
– Estimated Salvage Value – 2,000
= Est. Total Depreciation Expense $16,200
 Estimated Useful Life (miles)  90,000
= Depreciation Rate $0.18/mile
2. Calculate annual depreciation for year 1.
Total Miles Driven 9,000
 Depreciation Rate  $0.18
= Annual Depreciation Exp. $1,620.00
LESSON 8-4

6. CALCULATING DEPRECIATION EXPENSE FOR INCOME TAX PURPOSES
LESSON 8-4
5/28/2018
CALCULATING DEPRECIATION EXPENSE FOR INCOME TAX PURPOSES
page 246
Plant asset: Printer
Depreciation method: MACRS
Original cost: $2,000.00
Property class: 5 year
Year
Depreciation Rate
Annual Depreciation 1 2 3 4 5 6
Totals
20.00%
32.00%
19.20%
11.52%
5.76%
100.00%
$400.00
640.00
384.00
230.40
115.20
$2,000.00
Original Cost
Depreciation Rate =
Annual Depreciation Rate
Year 3
$2,000.00
19.20% =
$384.00
LESSON 8-4
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7. DEPLETION 1 2 page 247 Plant asset: Coal Mine
Depreciation method: Production-unit
Original cost: $100,000.00
Estimated salvage value: $12,250.00
Estimated total depletion: $87,750.00
Est. tons of recoverable coal: 50,000 tons
Depletion rate: $1.755 per ton
Year
Beginning Book Value
Tons Recovered
Annual Depletion
Ending
Book Value 1 2 3 4 5
Totals
$100,000.00
89,470.00
68,410.00
45,595.00
29,800.00
6,000
12,000
13,000
9,000
46,000
$ 10,530.00
21,060.00
15,795.00
10,530.00
$80,730.00
$89,470.00
69,410.00
19,270.00 1 2
1. Calculate the depletion rate.
Original Cost $100,000
– Estimated Salvage Value – 12,250
= Est. Total Value of Coal $87,750
 Est. Tons of Recoverable Coal  50,000
= Depletion Rate per Ton of Coal $1.755
2. Calculate annual depletion for year 1.
Tons of Coal Removed 6,000
 Depletion Rate  $1.755
= Annual Depreciation Exp. $10,530.00
LESSON 8-4

8. TERMS REVIEW declining-balance method of depreciation
page 248
declining-balance method of depreciation
sum-of-the-years’-digits method of depreciation
production-unit method of depreciation
Modified Accelerated Cost Recovery System
depletion
LESSON 8-4