Sum-of-the-Years'-Digits Depreciation
The equation for calculating sum-of-the-years'-digits depreciation is:
|
Acquisition Cost - Salv. Val. |
X |
Useful Life Remaining
|
= |
Annual Depr. |
To calculate the sum-of-the-years' digits in the above equation, add the digits for each year in the useful life. For example, for an asset with a 3-year useful life, the sum-of-the-years' digits is:
Year 1 + Year 2 + Year 3 = 6
You can also use the following formula:
n(n + 1)
2
where n = the useful life
For an asset with a 5-year useful life, the sum-of-the-years' digits is:
|
5(5 + 1) |
= |
30 |
= |
15 |
Here is an example:
|
Acquired Value: |
$16,000 |
|
Salvage Value: |
$1,000 |
|
Estimated Life: |
5 Years |
|
Placed-in-Service Date: |
01/01/2021 |
Year 1:
|
(16,000 - 1,000) |
X |
5
|
= |
$5,000 |
Year 2:
|
(16,000 - 1,000) |
X |
4
|
= |
$4,000 |
Year 3:
|
(16,000 - 1,000) |
X |
3
|
= |
$3,000 |
Year 4:
|
(16,000 - 1,000) |
X |
2
|
= |
$2,000 |
Year 5:
|
(16,000 - 1,000) |
X |
1
|
= |
$1,000 |