Example: Using the examples from the previous two steps, the delta is 12 months (January 1, 2003 - December 31, 2003).
4.It subtracts the salvage value from the purchase price. This is the depreciable amount.
Example: Assume the purchase price for the element is $2500 and the Salvage Value is $100. The depreciable amount is $2400, which was calculated by subtracting the Salvage Value ($100) from the purchase price ($2500).
5.It takes the depreciable amount and divides it by the depreciation period (the number of months it takes for the asset to fully depreciated to either 0 or salvage value). This gives us the depreciation for a single month.
Example: Let's use the depreciable amount ($2400) calculated in the previous step. Let's assume the depreciation period is 24 months. Divide $2400 by 24. The result is $100, which is the one month depreciation.
6.It multiplies the depreciation for a single month by the delta from step 3. This is the total depreciation.
Example: To find the total depreciation, multiply the one month depreciation from the previous step ($100) by the delta (12 months), which was calculated in Step 3. The result of $100 x 12 months is $1,200, which is the total depreciation.
7.To determine the value as of end of last month, the management server simply subtract the total depreciation from the purchase price.
Example: Subtract the total depreciation ($1200), which was calculated in the last step, from the purchase price ($2500), which was provided in Step 4. The value as of the end of last month is $1300.
Calculating Fixed Declining Balance
The Fixed Declining Balance method calculates depreciation based on the value of the asset each month instead of a fixed rate like straight line depreciation.
These instructions describe how the management server performs the fixed declining balance calculation. An example is provided for each step so that you can try the calculations for yourself.
The following is how the management server calculates fixed declining balance:
Example: Assume the purchase date of an element is January 15, 2003. The management server adjusts the purchased date to January 1, 2003 when calculating months to depreciate.The management server rolls back the purchase date to the beginning of the purchase month. If the purchase date is later than today (for example, a future purchase), then the purchase date is roll back to today.
1.It determines the period ending date. This is equivalent to the last day of the previous full month.
Example: Assume today's date is January 9, 2004. The management server sets the period ending to December 31, 2003.
2.The management server calculates the delta between purchase date and the period ending. This determines how many months worth of depreciation amount the management server need to take into account.
Example: Using the examples from the previous two steps, the delta is 12 months (January 1, 2003 - December 31, 2003).
574 Chargeback Manager