Example of Depreciation Schedule

Oct 13, 2025 by talynt.org 34 views

Introduction

Fixed assets, also known as tangible assets, are long-term assets that are used in the production of goods or services. They are typically physical assets such as property, plant, and equipment (PP&E). In this article, we will discuss the depreciation of a bakery's industrial oven, which was acquired on January 2, 2019. The oven was imported from the United States and has an estimated life of use of ten years with a residual value of 5% of the value of the machine.

The Industrial Oven

The industrial oven was purchased by the bakery on January 2, 2019, for $100,000. The oven was imported from the United States and was installed in the bakery's production facility. The oven is used to bake bread and other baked goods, and it is a critical piece of equipment for the bakery's operations.

Depreciation Method

The bakery uses the straight-line method of depreciation to calculate the depreciation of the industrial oven. This method assumes that the asset will be used for its entire estimated life, and that the depreciation will be spread evenly over that period. The formula for the straight-line method is:

Depreciation = (Cost - Residual Value) / Estimated Life

In this case, the cost of the oven is $100,000, the residual value is 5% of the cost, or $5,000, and the estimated life is 10 years. Plugging these values into the formula, we get:

Depreciation = ($100,000 - $5,000) / 10 Depreciation = $95,000 / 10 Depreciation = $9,500 per year

Annual Depreciation

Using the straight-line method, the bakery will depreciate the industrial oven by $9,500 per year for 10 years. This means that the oven will be fully depreciated after 10 years, and its residual value will be $5,000.

Example of Depreciation Schedule

Here is an example of a depreciation schedule for the industrial oven:

Year	Depreciation	Accumulated Depreciation	Book Value
1	$9,500	$9,500	$90,500
2	$9,500	$19,000	$81,000
3	$9,500	$28,500	$71,500
4	$9,500	$38,000	$62,000
5	$9,500	$47,500	$52,500
6	$9,500	$57,000	$43,000
7	$9,500	$66,500	$33,500
8	$9,500	$76,000	$24,000
9	$9,500	$85,500	$14,500
10	$9,500	$95,000	$5,000

Conclusion

In conclusion, the bakery's industrial oven will be depreciated by $9,500 per year for 10 years using the straight-line method. The oven will be fully depreciated after 10 years, and its residual value will be $5,000. This depreciation schedule will help the bakery to accurately record the value of the oven on its financial statements and to make informed decisions about its operations.

References

American Institute of Certified Public Accountants (AICPA). (2019). Accounting Standards Codification (ASC) 360, Property, Plant, and Equipment.
Financial Accounting Standards Board (FASB). (2019). Accounting Standards Update (ASU) 2019-01, Leases.

Glossary

Depreciation: The decrease in value of a tangible asset over its useful life.
Residual value: The value of a tangible asset at the end of its useful life.
Straight-line method: A method of depreciation that assumes that the asset will be used for its entire estimated life, and that the depreciation will be spread evenly over that period.