SF Depreciation
The SF depreciation method is very similar to the SL depreciation method, except that it uses the full month averaging convention.
The first step in calculating depreciation for depreciation method SF is to calculate the adjusted basis. The formula for calculating the adjusted basis is:
|
Original Cost - Salvage Value |
= |
Adjusted Basis |
The formula for calculating straight-line depreciation is:
|
Adjusted Basis
|
= |
Annual Depreciation |
Here is an example:
|
Original Cost: |
$14,000 |
|
Salvage Value: |
$2,000 |
|
Placed-in-service Date: |
04/16/2021 |
|
Estimated Life: |
5 Years |
First, calculate the adjusted basis:
|
$14,000 - $2,000 |
= |
$12,000 |
Next, calculate the annual depreciation:
|
$12,000
|
= |
$2,400 |
Year 1:
|
$2,400 |
X |
9 * |
= |
$1,800 |
* The SF depreciation method uses the full month averaging convention. The asset is treated as though it were placed in service on April 1. It receives a full month of depreciation in April and 9 months of depreciation in the first year.
Years 2 through 5:
In years 2 through 5, the asset receives the yearly depreciation of $2,400 (as calculated above).
Year 6:
|
$2,400 |
X |
3
|
= |
$600 |
In the final year, the asset receives 3 months of depreciation.