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DEPREC.DOC
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1984-09-09
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DEPREC - Depreciation Schedules
1. INTRODUCTION
Depreciation is a non-cash item deducted from income before
taxes are calculated. It is intended to allocate the cost of
capital equipment over its useful life. A number of methods can
be used to calculate the amount to be allocated, and you should
seek qualified advice to choose the appropriate method. This
worksheet calculates depreciation by five methods:
- straight line: the depreciation amount is the same in
every year (except possibly the first and last).
- sum of years' digits: each year in the life is assigned a
number from N to 1 (i.e. in reverse order). The
depreciation in each year is proportional to the number
assigned to that year.
- declining balance: the depreciation in each year is a
fixed percentage of the opening book value for the year.
- declining balance with crossover: this method is similar
to declining balance, except that when the depreciation
falls below what would be allowed by the straight line
method over the remainder of the life, the (higher)
straight line depreciation is used. This method
depreciates the book value to the salvage value over the
life of the asset; the declining balance method may not
depreciate it so much.
- accelerated cost recovery system: the Economic Recovery
Tax Act of 1981 introduced new rules for depreciation.
Assets are assigned to one of five categories, and the
depreciation percentages are laid out for each category.
This worksheet is very simple to use. Just enter the cost
and other data shown in the input menu, and request a calculation.
You can examine the results of the calculation on your screen in
tabular or graphic form, or send them to your printer. Three
forms of graph are available for each schedule: a line graph, a
side-by-side bar chart, and a stacked bar chart.
2. USING DEPREC
The main menu of the DEPREC worksheet offers you seven
choices (plus Quit). They are as follows:
Input
This choice allows you to enter the input data needed for
the depreciation calculations. It leads to a sub-menu of
all the input data items. To enter or change an item,
select it from this menu, type the value, and press the
09/09/84 DEPREC - 1
ENTER key. Input is described in more detail below.
Blank
Choose this option if you want to clear the input area and
all calculated results. You will be asked to confirm your
intention to delete all the data.
Calc
When you have entered your data, select this option to
perform the calculations. It will set up all five
depreciation schedules then return you to the main menu.
Results
This option displays the depreciation schedules on your
screen. It leads to a sub-menu from which you can select
the schedule you want to display. If the life of the asset
is more than 15 years, you will get a scroll menu along with
the schedule so you can scroll the display up and down the
schedule.
Graph
You can produce three graphs from each schedule. The first
is a line graph showing the annual depreciation and closing
book value for each year, and accumulated depreciation. The
second is a side-by-side barchart showing the same
information as the line graph. The third is a 'stacked bar'
chart. In this chart, the lower section of each bar
represents the closing book value; the middle section
represents the depreciation for this year, and the top
section represents the prior accumulated depreciation (thus
the top two sections taken together represent the
accumulated depreciation). The Graph option is described in
more detail below.
Print
You can print any of the depreciation schedules, and the
input data area. The Print option is described in more
detail below.
Agenda
If you select this option (and confirm it when requested),
the current worksheet is lost and replaced by the main
agenda. Then you can load another worksheet from the disk.
Note confirmation is required before this option proceeds,
because it will overwrite the current worksheet.
2.1 Input Details
The input menu allows you to enter or change any input value.
The menu offers seven choices (plus Quit). To enter or change a
particular value, select it from the menu, type the (new) value,
and press the ENTER key. The value you enter will be checked for
reasonableness. If the value is not reasonable (eg. asset cost is
zero or less), 1-2-3 will beep at you, and you must enter a new
(reasonable) value before you can return to the input menu. The
items you can enter are as follows:
09/09/84 DEPREC - 2
Cost
allows you to enter the original cost of the asset. This
may be any value that is greater than the sum of the salvage
value and the grants. Note that if you are replacing data
that is already present, and you want to enter a
substantially lower value for the cost, the system may
object because it is lower than the sum of the previous
values for grants and salvage value which have not been
replaced. The simplest solution here is either to blank out
the previous input using the Blank option in the main menu,
or else to enter the salvage value and grants before the new
asset cost.
Grants
allows you to enter the amount of any grants or similar
credits which you might receive as a result of purchasing
this asset. Obviously, you can only depreciate an amount
net of these grants (which the worksheet calculates for
you). Grants must be zero or greater, but not greater than
the difference between the asset cost and the salvage value.
If you are entering data on top of existing data, and the
new cost is substantially greater than the old one, you
should enter it first. Otherwise the worksheet may object
to the value for grants because it is greater than the
difference between the (old) asset cost and salvage value.
Salvage
allows you to enter the salvage value of the asset at the
end of its useful life. The value you enter must be zero or
positive, but less than the asset cost minus grants. If you
are typing new data on top of existing data, and the new
asset cost is substantially higher than the previous one,
you should enter the cost first. Otherwise, the worksheet
might object when you try to enter the salvage value because
it is higher than the difference between the (old) cost and
grants.
PurDate
allows you to enter the purchase date of the asset. The
purchase data is split into two parts (distinguished by a
sub-menu) - the year and the month. To enter the year of
purchase, you must type (initial letters only) PurDate Year
followed by the year (four digits). To enter the month of
purchase, you must type (initial letters only) PurDate Month
followed by the month (January=1, February=2, etc.). The
purchase year is used only to annotate the schedules. The
purchase month affects the amount of depreciation taken in
the first year, and the amount that rolls over into the last
year of the schedule. (Unless the purchase month is 1, the
schedule will cover one more year than the life of the asset
to accommodate this roll-over.) For example, if the purchase
month is July (7), then only half the normal depreciation
will be taken in the first year, and the following years'
depreciations will be adjusted to compensate. If you can
take the full depreciation in the first year, you should
09/09/84 DEPREC - 3
enter 1 for the purchase month, regardless of when the asset
is purchased. The above comments do not apply to items in
ACRS Recovery Cost Categories 1 through 4, which are
unaffected by the month of purchase. For ACRS Recovery Cost
Category 5, a different schedule of percentages applies to
each month of purchase.
Life
allows you to enter the useful life (in years) of the asset.
This determines the period of time over which the asset will
be depreciated.
DBRate
allows you to enter the percentage of the opening book value
that may be deducted each year. The amount that may be
deducted each year decreases as the prior years' deductions
reduce the book value. You must enter a number between zero
and 100 (inclusive).
ACRSCat
allows you to enter the Recovery-Life Category, as defined
by the Economic Recovery Tax Act of 1981. The Categories
are as follows:
1 - 3-year property, for example automobiles, light trucks,
and equipment used in research and development.
2 - 5-year property, including most machinery and equipment
not falling into category 1.
3 - 10-year property, which covers certain types of public
utility property and real estate.
4 - 15-year utility property, including public utility
property, and some kinds of real estate such as
low-rental units.
5 - 15-year real property, which covers all other real
estate.
You must enter one of the above category numbers, or 1-2-3
will beep at you.
2.2 Graph Details
The graph menu offers you seven choices (plus Quit). Five
correspond to the five schedules you can display. The other two
allow you to choose the type of plot (line, bar, or stacked-bar),
and to set options (color or monochrome plots). The information
shown for each schedule is the same - annual and cumulative
depreciation, and closing book value. A slight exception occurs
in the stacked bar chart, where it makes more sense to show the
prior accumulated depreciation above the current year's
depreciation, so the sum of these two is the accumulated
depreciation (which, when added to the closing book value, always
gives the original cost, net of grants).
09/09/84 DEPREC - 4
The options in the graph menu are as follows:
Type
allows you to specify which form of graph you want. The
three choices in the sub-menu are Line, Bar, and Stacked
Bar. The line graph shows annual and accumulated
depreciation, and closing book value in three separate
lines. The bar graph shows the same three items as three
vertical bars side-by-side. The stacked-bar graph shows
only one vertical bar for each year. The bar is divided
into three slices. The lowest slice represents the closing
book value for the year, the centre slice represents the
depreciation for the year, and the top slice shows the
accumulated depreciation for prior years.
Options
allows you to specify Color or Black-and-white (ie.
monochrome) graphs, and to View the latest graph without
respecifying it. You might use this last option if you have
reset some of the graph options without changing data, and
want to see their effect.
Stline
plots the straight line depreciation schedule.
YrDig
plots the sum-of-years' digits depreciation schedule.
Dbal
plots the declining balance depreciation schedule.
Xover
plots the declining balance depreciation schedule with
crossover to straight line.
ACRS
plots the Accelerated Cost Recovery System depreciation
schedule.
2.3 Print Details
When you choose Print from the main menu, the macro pauses so
you can re-align the paper. Once you have done so, it remembers
where the top of the page is so that it can skip to the top of a
new page when you select the Page option from the print menu. The
worksheet does not automatically skip to a new page after each
schedule. If you want to print schedules on separate pages,
simply use the Page option to force a skip to a new page after
you've printed each one. If you omit the Page option, you can
print several schedules per page.
The print sub-menu offers seven choices (plus Quit). The
choices are as follows:
09/09/84 DEPREC - 5
Input
prints the input data area of the worksheet.
Stline
prints the straight line depreciation schedule.
YrsDig
prints the sum-of-years'-digits depreciation schedule.
Dbal
prints the declining balance depreciation schedule.
Xover
prints the declining balance depreciation schedule with
crossover to straight line depreciation.
ACRS
prints the Accelerated Cost Recovery System depreciation
schedule.
Page
forces a skip to the top of a new page.
3. EXAMPLE - Buying a Truck
In July 1984, you buy a light truck for your business. The
truck costs you $10,000, but you get a $500 tax credit. You
expect the truck to last three years, at which point its salvage
value should be $2,000. You want to consider a declining balance
rate of 40%, and the truck is classified in ACRS cost recovery
category 1.
When the DEPREC worksheet is loaded, you may enter the data
as follows:
Keystrokes Comments
{ENTER} Press the ENTER key to select the first
choice in the main menu - Input.
c 10000 {ENTER} Asset cost.
g 500 {ENTER} Grants to be netted against the asset cost.
s 2000 {ENTER} Salvage value.
py 1984 {ENTER} Year of purchase.
pm 7 {ENTER} Month of purchase.
l 3 {ENTER} Asset life (in years).
d 40 {ENTER} Declining balance rate.
09/09/84 DEPREC - 6
a 1 {ENTER} ACRS cost-recovery category.
q Return to the main menu.
c Calculate. There will be a delay while all
the schedules are calculated.
You can now display the schedules on your screen by choosing
the Results option from the main menu. Here's how:
r Select the Results option.
i Displays the input (home) screen. This
option typically has no effect, because you
are already on the home screen.
s Straight line depreciation schedule.
y Sum-of-years'-digits depreciation schedule.
d Declining balance depreciation schedule.
x Declining balance depreciation schedule with
crossover to the straight line method.
a Accelerated Cost Recovery System depreciation
schedule.
If the asset life is more than 15 years, the display of a
schedule is accompanied by a scroll menu that allows you to scroll
up and down the schedule one screen-full at a time.
The next option on the main menu is Graph. The graph menu
offers seven choices (plus Quit). You can display any one of
three types of graph for each of the five schedules. For example,
if you want to display a stacked bar graph of the ACRS
depreciation, you would proceed as follows (from the main menu):
g Select the Graph option.
ts Select a stacked bar graph.
a Display this graph for the ACRS schedule.
(Press any key when you've finished viewing
the graph.)
q Return to the main menu.
To print the depreciation schedules, select Print from the
main menu. For example, to print the input data and ACRS
depreciation schedule on one page, and the straight line and
declining balance depreciation schedules on a second page, proceed
as follows:
09/09/84 DEPREC - 7
p Select Print from the main menu. The system
will prompt you to align the paper in your
printer to the top of a new page.
{ENTER} Press the ENTER key when you have aligned the
paper. This tells the system where the top
of the page is so it can skip to the top of
the next page if you select Page from the
print menu.
ia Print the input data and ACRS depreciation
schedule on one page.
psd Skip to a new page, and print the straight
line and declining balance depreciation
schedules.
q Return to the main menu.
09/09/84 DEPREC - 8
Menu Tree for DEPREC Worksheet
Input - Input all data.
. Cost - Input the asset cost.
. Grants - Input grants to be netted against the cost.
. Salvage - Input the salvage value at the end of the life.
. PurDate - Input the purchase date.
. . Year - Input the year of purchase.
. . Month - Input the month of purchase (January=1, etc.).
. Life - Input the useful life of the asset (in years).
. DBRate - Input the declining balance depreciation rate (%).
. ACRSCat - Input the ACRS recovery-life category (1-5).
. Quit - Return to main menu.
Blank - Blank out all input and depreciation schedules.
. No - Do not blank out; return to main menu.
. Yes - Blank out data, then return to main menu.
Calc - Calculate all depreciation schedules.
Results - Display depreciation schedules on the screen.
. Stline - Display straight line depreciation schedule.
. YrsDig - Display sum-of-years-digits depreciation schedule.
. Dbal - Display declining balance depreciation schedule.
. Xover - Display crossover depreciation schedule.
. ACRS - Display ACRS depreciation schedule.
. Quit - Return to main menu.
Graph - Display graphs of depreciation schedules.
. Type - Set graph type.
. . Line - Prepare to display line graphs.
. . Bar - Prepare to display bar graphs.
. . Stacked-Bar - Prepare to display stacked bar graphs.
. Options - Set graph options.
. . Color - Display graphs in color.
. . B&W - Display graphs in monochrome.
. . View - Re-display the last-seen graph.
. Stline - Graph straight line depreciation schedule.
. YrsDig - Graph sum-of-years-digits depreciation schedule.
. Dbal - Graph declining balance depreciation schedule.
. Xover - Graph crossover depreciation schedule.
. ACRS - Graph ACRS depreciation schedule.
. Quit - Return to main menu.
Print - Print input data and depreciation schedules.
. Input - Print input data.
. Stline - Print straight line depreciation schedule.
. YrsDig - Print sum-of-years-digits depreciation schedule.
. Dbal - Print declining balance depreciation schedule.
. Xover - Print crossover depreciation schedule.
. ACRS - Print ACRS depreciation schedule.
. Page - Skip to the top of the next page.
. Quit - Return to main menu.
Agenda - Return to worksheet agenda.
. No - Do not leave this worksheet; return to main menu.
09/09/84 DEPREC - 9
. Yes - Clear this worksheet and load agenda.
Quit - Exit to 1-2-3 READY mode.
09/09/84 DEPREC - 10
