How to create a Units-of-Production Depreciation Schedule

Love Thy Pets Inc., Depreciation Schedule Units of Production Title of Asset: Vehicle Cost of Asset $20,000 Residual Value $5,000 Projected units per useful life 100,000 Miles A B C D E F Annual End Actual Accumulated Cost of Cost per Depreciation of Mileage per depreciation Asset unit Expense for year year at end of year each year 1 $20,000 20,000 $0.15 $3,000 $3,000 2 $20,000 30,000 $0.15 $4,500 $7,500 3 $20,000 30,000 $0.15 $4,500 $12,000 4 $20,000 10,000 $0.15 $1,500 $13,500 5 $20,000 15,000 $0.15 $1,500 $15,000

1 2 3

G Book Value $17,000 $12,500 $8,000 $6,500 $5,000

4 5 6 7 8

1. Always start with the three-line header, which in the case of a units-of-production schedule includes the corporations name, the title for the method of Depreciation, and the title of the asset. 2. Next use the formula to calculate the cost per unit. Cost of Asset Residual Value Projected units per useful life 20,000 5,000 100,000 =$0.15 per mile of usage 3. On line one write, the title Cost of Asset and in the next box over write the dollar value of the asset. 4. On line two write, the title Residual Value and in the next box over write the dollar value of the asset at the end of its useful life to the corporation. 5. On line three write, the title Projected units per useful life and in the next box over write the estimated number of units that the asset will produce over its useful life to the corporation.

MJC Revised 12/2011

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How to create a Units-of-Production Depreciation Schedule

6. On the next two lines place the headers for the schedule: A End of year B Cost of Asset C Actual Mileage per year D Cost per unit E Annual Depreciation Expense per year F Accumulated depreciation at end of year G Book Value

7. For column A on line four through eight, write 1 through 5. 8. For column B on lines four through eight, write the historical cost of the asset. 9. For column C on lines four through eight, write the actual mileage driven for each year. 10. For column D on lines four through eight, write the cost per mile calculated in step 2. 11. For column E, multiply the number of miles driven in column C times the cost per unit in column D which will result in the annual depreciation expense for each year. 12. For column F, add the annual depreciation for the current year to the annual depreciation expense for all of the past years to get the current accumulated depreciation. 13. For column G, subtract the dollar amount of accumulated Depreciation in column F from the cost of the asset in column B to get the book value for the asset.

*Very Special Important Note: When using units-of-production you must stop taking depreciation expense when the total depreciation reaches the total depreciable cost. Depreciable cost is historical cost minus residual value. An asset may never be depreciated below its residual value.

MJC Revised 12/2011

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