Sum of Years Digit Example
Sum of Years Digit allows you to set up an accelerated depreciation method to use when the asset is more productive when it is new.
In other words, the depreciation is greater in the earlier years of the asset's useful life and less in the later years. However, the total amount of depreciation over the asset's useful life does not change.
This method uses the following calculation for depreciation:
Depreciable base x (Remaining useful life / Sum of years digits)
For example, a piece of radiology equipment cost $160,000, the useful life is 5 years, and the expected valued at the end is $10,000. Because the equipment will be sold at the end of five years for $10,000, the total depreciable cost is $150,000.
Year | Depreciation Amount per Year |
---|---|
1 | 5/15 of $150,000 = $50,000 |
2 | 4/15 of $150,000 = $40,000 |
3 | 3/15 of $150,000 = $30,000 |
4 | 2/15 of $150,000 = $20,000 |
5 | 1/15 of $150,000 = $10,000 |
Sum | $150,000 |
Vision uses the following information to calculate Sum of Years Digits depreciation:
Description | Location |
---|---|
Depreciation Basis | |
In Service Period | |
In Service Date | |
Yearly Depreciation Amount | Multiply the % per year times the Depreciation Basis. The % per year is derived from the | .
Current Period Cumulative Depreciation | Comes from the assigned asset class (default) or the edited value on the |
Calculate the Period Depreciation | Current cumulative depreciation minus the previous cumulative depreciation |
Copy Accumulated Depreciation | Copy the current accumulated depreciation to the previous accumulated depreciation. |
Vision sets up Sum of Year Digits depreciation by completing the following steps:
Step | Description |
---|---|
1 | Pull the depreciation basis from the Cost tab of the Equipment Info Center. |
2 | Enter the in service date. |
3 | Count the in service periods. |
4 | Calculate the yearly depreciation amount. |
5 | Calculate the period cumulative depreciation. |
6 | Copy the current accumulated depreciation amount to the previous accumulated depreciation amount. |
7 | Add this amount to the Depreciation tab of the Equipment Info Center. |