90.9% of surveyed companies use this method.
1.7% of surveyed companies use this method.
0.4% of surveyed companies use this method.
First, a depreciation rate per unit produced is calculated. Then that rate is multiplied by the actual number of units produced in the period to arrive at a total depreciation cost number.
If a property, plant, and equipment or intangible asset is acquired or built part-way through the year, a company must adjust its depreciation calculations to reflect the period of time the asset was actually in use.
In the example above, suppose the asset was purchased on April 1st instead of the beginning of the year.
When property, plant, and equipment is sold, a gain or loss is recognized for the difference between the selling price and the asset's book value.
Debit: Cash
Debit: Accumulated depreciation
Debit: Loss on sale (if there is a loss)
Credit: Property, plant, and equipment (PP&E) asset
Credit: Gain on sale (if there is a gain)
Measured at the lower of an asset's (a) book value or (b) fair value less cost to sell.
If company just retires the asset without selling it, the journal entry above is the same except there is no debit to cash and a loss is recorded for whatever the remaining net book value is (original cost of asset less accumulated depreciation).
Group and composite depreciation methods aggregate assets to reduce to the recordkeeping costs of determining depreciation.