The sum of the years’ digits depreciation method is one of the techniques used to depreciate and asset more quickly during the beginning of its life than the end. Unlike under the straight line method, the depreciation expense is not the same for every full period of depreciation. Rather the amount of depreciation is greater in the early periods and declines in each successive period.
See a table comparing the different depreciation amounts using the different depreciation methods.
To return the value of one period of sum of the years’ digits depreciation expense.
cost– Acquisition cost of the asset. Includes purchase price and costs associated with its acquisition such as freight and sales tax.
salvage– Amount that you expect to receive in exchange for the asset at the end of its useful life. Typically, this is zero. However, an example of a case where this not zero is the expected trade-in value of an automobile.
life– Length of time that the asset is expect to be in service given in number of periods.
period– The period for which you are calculating depreciation expense.
An automobile is purchased for 36,000 that is expected to last 3 years and be traded-in for 3,000.
|3||$3,000||salvage||money back at end of life|
|4||3||life||number of periods for useful life|
|5||1||period||which period the expense is for|
||Depreciation expense for first period||$16,500|
||Depreciation expense for second period||$11,000|
||Depreciation expense for final period||$5,500|
A laptop computer is purchased for €3,000 that is expected to last 36 months and is expected to be worth €150 at the end of the two years.
||Depreciation expense for month 11||€111|
Live example in Sheets
Go to this spreadsheeet for a live version of the SYD function that you can study and use anywhere you would like.