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How to calculate sum-of-the-years’-digits depreciation

SOYD is an accelerated method: more depreciation in the early years and less later.

Problem

Equipment costs $50,000, has a salvage value of $5,000 and an 8-year life. What is the SOYD depreciation in years 1 and 2?

Keystrokes

  1. fFINx≷y
    0.00

    Start clean.

  2. 50000PV
    50,000.00

    The cost.

  3. 5000FV
    5,000.00

    The salvage value.

  4. 8n
    8.00

    The life in years.

  5. 1fSOYDΔ%
    10,000.00

    Year 1.

  6. 2fSOYDΔ%
    8,750.00

    Year 2.

Answer

Year 1 is $10,000.00 and year 2 is $8,750.00.

Why it works

The digits of an 8-year life add up to 1 + 2 + … + 8 = 36. Year 1 takes 8/36 of the $45,000 depreciable amount, year 2 takes 7/36, and so on down to 1/36 in year 8.

Questions

Where is the remaining value?

After each SOYD, x≷y shows what’s left to depreciate.

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