How do I Figure Straight Line Depreciation on Farm Equipment for 2003?

Farm equipment is an asset, so it must be depreciated.

Straight line depreciation is a depreciation method that reduces the worth of an asset at a constant rate over the life of that asset. For farm equipment in 2003, the most important part of the calculation is finding how much depreciation the asset already incurred. This is the accumulated depreciation account on the farm's balance sheet. If you start the depreciation at the cost of the equipment instead of the book value of the equipment, you will have too much depreciation.

Instructions

1. Find the book value of the farm equipment. The book value is the value that the equipment is worth on the farm's financial statements. The book value is the cost you paid for the equipment minus any depreciation you took in previous years. For example, a farmer has equipment that cost $500,000 but already has accrued $200,000 in depreciation, so the book value is $300,000.

2. Calculate the remaining useful life on the assets. In the example, when the farmer bought the equipment, he estimated it to last 25 years. That was 10 years ago, so the remaining useful life is 15 years.

3. Divide the book value of the asset by the remaining useful life to determine depreciation for the year. In the example, $300,000 divided by 15 years equals $20,000 of depreciation.

References

• Accounting Info: Depreciation Methods, Accounting