The appraisal schedule is, therefore, as follows:
| Age in Periods | Fixed Depreciation Rate % | Periodic Depreciation | Depreciated or Appraised Value | Total Accumulated Depreciation |
|---|---|---|---|---|
| 0 | ..... | $ ..... | $150.00 | $ ..... |
| 1 | 19.726 | 29.59 | 120.41 | 29.59 |
| 2 | 19.726 | 23.75 | 96.66 | 53.34 |
| 3 | 19.726 | 19.07 | 77.59 | 72.41 |
| 4 | 19.726 | 15.32 | 62.27 | 87.73 |
| 5 | 19.726 | 12.27 | 50.00 | 100.00 |
| 100.00 | ||||
The following chart shows graphically the appraised values and the accumulated depreciation:
Graphic Chart—Fixed Percentage of
Diminishing Value Method
(b) Changing Percentage of Cost Less Scrap Method
Similar in effect to the method just explained is the “Changing Percentage of Cost Less Scrap” or the “Sum of Expected Life-Periods” method. Here, the base remains fixed, but the periodic depreciation rates change. Each depreciation rate is a fraction the common denominator of which is the sum of the expected life-periods as viewed from the beginning of each successive period, and the numerator of which is the expected life for the period in question. For example, an asset of which the expected life is 5 periods has at the beginning of each successive period expected life-terms of 4, 3, 2, and 1 periods respectively, making a total of 15 which becomes the common denominator of the fractions whose numerators are 5, 4, 3, 2, and 1 respectively; i.e., the changing depreciation rates are ⁵/₁₅, ⁴/₁₅, ³/₁₅, ²/₁₅, and ¹/₁₅. For an asset costing $150 with expected life of 5 periods and scrap value of $50, the appraisal schedule would be as follows:
| Age in Periods | Changing Depreciation Rate % | Periodic Depreciation | Depreciated or Appraised Value | Total Accumulated Depreciation |
|---|---|---|---|---|
| 0 | ..... | $ ..... | $150.00 | $ ..... |
| 1 | 33⅓ | 33.33 | 116.67 | 33.33 |
| 2 | 26⅔ | 26.67 | 90.00 | 60.00 |
| 3 | 20 | 20.00 | 70.00 | 80.00 |
| 4 | 13⅓ | 13.33 | 56.67 | 93.33 |
| 5 | 6⅔ | 6.67 | 50.00 | 100.00 |
A comparison of this appraisal schedule with that of the fixed percentage of diminishing value method shows that this method charges more depreciation during the early life-periods and less during the later periods. The general effect of this method and its significance are discussed in [Chapter X] where the relative merits of the various methods are considered. The graph for the sum of expected life-periods method is not shown as it differs little from that of the fixed percentage of diminishing value method on page 158.
(c, d) Arbitrary Methods