Activity depreciation is based on level of activity for each period such as cycles of a machine, miles driven on a car or the amount of time a piece of equipment is used. This calculation is equivalent to our units of production depreciation calculator.
The activity method calculation results from 2 equations. Depreciation per unit and depreciation for a period.
You purchase a car for your business for $22,000 and you expect it to have a life of 60,000 miles with a final salvage value of $2,000.
Similar to the activity depreciation, the time depreciation calculation results from 2 equations. Depreciation per unit time and depreciation for a period based on total time the asset was used in that period.
You purchase a construction vehicle for your business for $225,000 and you expect it to have a life of 15,000 hours with a salvage value of $5,000 after about 10 years. In 1 specific period you used the vehicle for 1,475 hours.