The SYD function in Excel is used to calculate the sum-of-years-digits depreciation of an asset for a specified period. This method of depreciation accelerates the expense, meaning an asset will depreciate faster in its earlier years. Here’s how to use the SYD function:
Syntax
SYD(cost, salvage, life, per)
Parameters
- cost: The initial cost of the asset.
- salvage: The salvage value of the asset at the end of its useful life.
- life: The useful life of the asset (in periods, typically years).
- per: The specific period for which you want to calculate the depreciation. This should be a number between 1 and the life of the asset.
Example
Suppose you have an asset with the following characteristics:
- Cost: $10,000
- Salvage Value: $1,000
- Useful Life: 5 years
You want to calculate the depreciation for the third year.
Here’s how you can use the SYD function in Excel to find out the depreciation for year 3:
=SYD(10000, 1000, 5, 3)
- In an Excel spreadsheet, select a cell where you want the result to be displayed.
- Enter the formula:
- Press Enter.
The formula will return the depreciation expense for the third year based on the sum-of-years-digits method.
Explanation
- SYD(10000, 1000, 5, 3) calculates the depreciation for the third year.
- “cost” of $10,000 minus the “salvage” value of $1,000 gives a depreciable amount of $9,000.
- The sum-of-years-digits for a 5-year period is 1 + 2 + 3 + 4 + 5 = 15.
- For the third year, the fraction is 3/15.
- The depreciation for the third year is calculated as: ( frac{(5+4+3)}{15} times 9000 ).
This method of depreciation will yield decreasing expense amounts with each subsequent period. Adjust the parameters as necessary to fit your specific situation.
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