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→Example: add units example
==Example==
==Example==
A company buys machinery for $50,000, expects it to last five years, and at that time have a residual value of $5,000.
A company buys machinery for $50,000, expects it to last five years, and at that time have a residual value of $5,000. It is also expected to produce 1,000,000 units during its useful life.
===Straight-Line Depreciation===
===Straight-Line Depreciation===
| 5 || $14,000 || $9,000 || $5,000
| 5 || $14,000 || $9,000 || $5,000
|}
|}
===Units Depreciation===
Under the units method, the yearly depreciation is calculated as a rate per unit. In the example above, the rate is $0.045/unit [($50,000 - $5,000) / 1,000,000 units].
This method requires additional recordkeeping to determine the number of units, in addition to normal records relating to depreciation. Also, if the production rate changes dramatically, adjustments may need to be made to how depreciation is calculated. For example, a machine may have been forecast to produce 1,000,000 units, but now due to economic circumstances will only produce 800,000 units before it becomes technologically obsolete.
The units can either be units of consumption (such as miles on an automobile) or units of production.
==U.S. Tax Code==
==U.S. Tax Code==