You probably know that when you drive your new car off the lot for the very first time it depreciates in value. The same is true for the laundry equipment that is used to run your coin-operated laundromat or commercial laundry business. When the equipment is set up and used the very first time, depreciation begins. Replace your old equipment with the best Speed Queen distributors in Greensboro NC at T & L. Call us today to learn more.
What is depreciation?
Depreciation is the reduction in value of your equipment as the result of use or wear and tear.
How is depreciation calculated?
If you know the original purchase price of the equipment and the salvage value or the anticipated residual value of the equipment as well as the life expectancy of the equipment you can calculate the depreciation.
What is the residual value?
If you were to sell the equipment at the end of its useful life, the residual is the salvage amount you could expect to receive. By subtracting the residual value from the original cost and dividing it by the number of years you anticipate using the equipment you will be able to ascertain the yearly amount of depreciation.
There are several ways to calculate depreciation. You can calculate the sum of the years' digits depreciation, straight-line depreciation, declining balance depreciation, or use the double declining balance depreciation method. These methods are more complex than the first method we discussed. However, they provide an accurate figure that allows you to calculate different types of depreciation for your equipment.
The Sum of the Years' (SYD) Method
An accelerated depreciation method that records the bulk of the equipment's depreciation at the beginning of the asset's useful life, the SYD method can help you reduce the amount of taxable income your business will produce, delay your tax payments, and helps reduce the taxable cash flow in your business.
Declining Balance Depreciation
Instead of spreading the cost of your equipment evenly over the course of its useful life, the rate of depreciation declines over time and a higher rate of depreciation is recorded in the beginning. The declining balance of depreciation method is ideal for equipment that is used more in its early years of life.
Many companies use this method of calculating depreciation as it is the default method of doing so. No particular pattern of use for the equipment needs to be ascertained to use this method, and it is straightforward and easy to calculate.
Double Declining Balance Depreciation
The straight-line depreciation rate is doubled in this method to ascertain the accelerated depreciation rate. Using this figure is instrumental in determining the amount that the asset depreciates each year.
Reliable Speed Queen Distributors in Greensboro NC
Want more information on calculating the depreciation of your equipment? Let the experienced team at T & L Laundry Equipment, the most dependable Speed Queen distributors in Greensboro NC, help you understand the value of depreciating the equipment in your business. For more than 40 years we've been helping commercial and vended laundry owners make their businesses successful through our understanding of basic business practices, industry trends, and by offering the latest in equipment technology from top brands like Speed Queen and Continental.
Call or come by the showroom today and put our team to work for your commercial or vended laundry business.