Sum-of-the-Years'-Digits Example
On September 14, 2002, an organization purchased a new forklift at a cost of $3,000. It had a useful life of 10 years and a $200 salvage value. The depreciation calculations would look like the following table.
This example uses a calendar fiscal year. First, calculate the denominator:
10(10 + 1) = 55
2
Then calculate the depreciation. Because the asset was placed in service after the beginning of the year, the depreciation deduction must be prorated. The total for each year, except the first year, is the remaining fraction from the previous year plus the fraction for the current year.
|
Date Range |
Calculations |
|
|
09/02 - 12/02 * |
4/12 x (10/55 x 2,800) |
= $169.70 |
|
Total 2002 depreciation |
= $169.70 |
|
01/03 - 08/03 |
8/12 x (10/55 x 2,800) |
= $339.39 |
|
09/03 - 12/03 |
4/12 x (9/55 x 2,800) |
= $152.73 |
|
Total 2003 depreciation |
= $492.12 |
|
01/04 - 08/04 |
8/12 x (9/55 x 2,800) |
= $305.45 |
|
09/04 - 12/04 |
4/12 x (8/55 x 2,800) |
= $135.76 |
|
Total 2004 depreciation |
= $441.21 |
|
01/05 - 08/05 |
8/12 x (8/55 x 2,800) |
= $271.51 |
|
09/05 - 12/05 |
4/12 x (7/55 x 2,800) |
= $118.79 |
|
Total 2005 depreciation |
= $390.30 |
|
01/06 - 08/06 |
8/12 x (7/55 x 2,800) |
= $237.57 |
|
09/06 - 12/06 |
4/12 x (6/55 x 2,800) |
= $101.82 |
|
Total 2006 depreciation |
= $339.39 |
|
01/07 - 08/07 |
8/12 x (6/55 x 2,800) |
= $203.63 |
|
09/07 - 12/07 |
4/12 x (5/55 x 2,800) |
= $ 84.84 |
|
Total 2007 depreciation |
= $288.47 |
* Under the midmonth convention, year 1 includes the month of September in the 4/12 proration because the asset was acquired before the 16th of the month.
The deductions continue in a similar manner for 5 more years.