How to create a Units-of-Production Depreciation Schedule

MJC Revised 12/2011 Page 1

Love Thy Pets Inc.,

Depreciation Schedule – Units of Production

Title of Asset: Vehicle

1 Cost of Asset $20,000

2 Residual Value $5,000

3 Projected units per useful life 100,000 Miles

A B C D E F G

End

of

year

Cost of

Asset

Actual

Mileage per

year

Cost per

unit

Annual

Depreciation

Expense for

each year

Accumulated

depreciation

at end of year

Book

Value

4 1 $20,000 20,000 $0.15 $3,000 $3,000 $17,000

5 2 $20,000 30,000 $0.15 $4,500 $7,500 $12,500

6 3 $20,000 30,000 $0.15 $4,500 $12,000 $8,000

7 4 $20,000 10,000 $0.15 $1,500 $13,500 $6,500

8 5 $20,000 15,000 $0.15 $1,500 $15,000 $5,000

1. Always start with the three-line header, which in the case of a units-of-production

schedule includes the corporation’s name, the title for the method of Depreciation, and

the title of the asset.

2. Next use the formula to calculate the cost per unit.

Cost of Asset – Residual Value

Projected units per useful life

20,000 – 5,000

100,000

=$0.15 per mile of usage

3. On line one write, the title “Cost of Asset” and in the next box over write the dollar value

of the asset.

4. On line two write, the title “Residual Value” and in the next box over write the dollar

value of the asset at the end of its useful life to the corporation.

5. On line three write, the title “Projected units per useful life” and in the next box over

write the estimated number of units that the asset will produce over its useful life to the

corporation.

How to create a Units-of-Production Depreciation Schedule

MJC Revised 12/2011 Page 2

6. On the next two lines place the headers for the schedule:

A B C D E F G

End of year

Cost of Asset

Actual Mileage per

year

Cost per unit

Annual Depreciation Expense per year

Accumulated depreciation

at end of year Book Value

7. For column “A” on line four through eight, write 1 through 5.

8. For column “B” on lines four through eight, write the historical cost of the asset.

9. For column “C” on lines four through eight, write the actual mileage driven for each year.

10. For column “D” on lines four through eight, write the cost per mile calculated in step 2.

11. For column “E,” multiply the number of miles driven in column “C” times the cost per unit in

column “D” which will result in the annual depreciation expense for each year.

12. For column “F,” add the annual depreciation for the current year to the annual depreciation

expense for all of the past years to get the current accumulated depreciation.

13. For column “G,” subtract the dollar amount of accumulated Depreciation in column “F” from the

cost of the asset in column “B” to get the book value for the asset.

*Very Special Important Note: When using units-of-production you must stop taking depreciation

expense when the total depreciation reaches the total depreciable cost. Depreciable cost is historical

cost minus residual value. An asset may never be depreciated below its residual value.