| # To calculate Remaining Life depreciation In straight-line depreciation, an equal portion of an asset's cost is depreciated in each period of its life. Using the straight-line method, LN reduces the asset's cost by its salvage value and accumulated depreciation, then divides the result by the number of periods in the asset's remaining life in order to come up with the depreciation amount for each period. Note The straight-line formula always considers remaining life and remaining value when calculating depreciation. If you have not made any adjustments to life, the calculation produces the same results as the standard straight-line depreciation would. If you do adjust life, LN recognizes this and continues to depreciate appropriately. Example A pickup truck used for maintenance at your company has a cost of $20,000, a salvage value of $1,500, and an estimated useful life of 60 periods. This is the computation of the annual depreciation expense for this asset in the first year:
    (cost - salvage value - accumulated depreciation)
    ________________________________________________ = annual depreciation expense per year
                 remaining years of life
or
    ($20,000 - $1,500)
    __________________ = $3,700
       5
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, see the Calculations and Averaging Conventions topic. Straight line (SL) has two variations based on the calculation mode: SL Daily The SL Daily formula is used when the calculation mode for the selected book is daily. LN calculates the depreciation amount for each period based on the exact number of days the period contains. LN considers remaining cost and remaining value in this calculation. The SL Daily formula:
     (cost - salvage value - accumulated depreciation) *
    		  (days in period / remaining life in days)
Example Your company has a conveyor with a cost of $10,000, a salvage value of $1,000, and an estimated life of 3 years or 36 periods. The service date for the asset is January 12, 2002. In the first period of the asset's life, the asset was in service for only 20 days. The calculations in the first period are:
      ($10,000 - $1,000) * (20 / 1095) = $164.38  ($10,000 - $1,000 - $164.38) * [ 28 / (1095 - 20) ] = $230.14 The
    			 accumulated depreciation after two periods is $394.52.
In the second period of the asset's life, there were 28 days. The calculations in the second period are:
    ($10,000 - $1,000 - $164.38) * [ 28 / (1095 - 20) ] = $230.14
The accumulated depreciation after two periods is $394.52. SL Periodic The SL Periodic formula is used when the calculation mode for the selected book is periodic. LN divides the year evenly into the number of periods your calendar specifies, then calculates depreciation for each resulting period. LN considers remaining cost and remaining value in this calculation. The SL Periodic formula:
     (cost - salvage value - accumulated depreciation) /
    			 remaining life in periods
Example Your company has an asset with a cost of $300,000, a salvage value of $45,000, and an estimated life of 10 years or 120 periods. In the first period of the asset's life, the depreciation amount is calculated:
     ($300,000 - $45,000) * ( 1 / 120) = $255,000 * .0083333 =
    			 $2,125.00
The depreciation amount accumulated in the first period is $2,125.00. In each subsequent period, LN subtracts the accumulated depreciation from the cost and salvage value and decreases the remaining life. For example, in the second period, this is how LN calculates the depreciation amount:
    ($300,000 - $45,000 - $2,124.99) * (1 / 119) = $2125.00
The accumulated depreciation after two periods is $4250.00. Your company has an asset with a cost of $300,000, a salvage value of $45,000, and an estimated life of 10 years or 120 periods. In the first period of the asset's life, the depreciation amount is calculated as follows:
    ($300,000 - $45,000) * ( 1 / 120) = $255,000 * .0083333 = $2,125.00
The depreciation amount accumulated in the first period is $2,125.00. In each subsequent period, LN subtracts the accumulated depreciation from the cost and salvage value and decreases the remaining life. For example, in the second period, this is how LN calculates the depreciation amount:
     ($300,000 - $45,000 - $2,124.99) * (1 / 119) = $2125.00
The accumulated depreciation after two periods is $4250.00. |