Units-of-Production Depreciation
Depreciation by USAGE, floored at salvage -- the activity method the time-based tiles skip: rate = (cost - salvage) / total_estimated_units; period = rate x period_units; book_value = max(cost - rate x accumulated_units, salvage). A $50,000 machine, $5,000 salvage, 100,000-unit life used 8,000 units this period depreciates $0.45/unit -> $3,600, book value $46,400. Two catches: an IDLE asset takes zero depreciation that period (time-based methods keep expensing), and the book value can never fall below salvage even past the unit life (run to 110,000 units and it floors at $5,000). A GAAP/book method for hours/miles-driven assets, not tax MACRS. A bookkeeping aid; the accounting policy and tax rules govern.
Formula and source
rate = (cost_basis - salvage_value) / total_units; period_depreciation = rate x period_units; book_value = max(cost_basis - rate x accumulated_units, salvage_value).
Units-of-production (activity) depreciation per GAAP and the IRS Pub 946 activity method, by name; the accounting policy and tax rules govern.
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