Landscape Depreciation

Plant: Saucer Magnolia

Term: Depreciation

Saucer MagnoliaMagnolia soulangiana• Plant type: Tree • USDA Hardiness Zones: 5a to 9a • Height & Spread: 20-25’ • Exposure: partial shade to full sun • Bloom Color: Pink, White • Bloom Time: Late winter, early spring• Growth Rate: slow • Landscape Uses: Espalier, Pest tolerant,

Specimen

Depreciation

• The amount or percentage by which something decreases in value over time

Depreciation

• Depreciation is applied to fixed assets – not supplies or something that will be used up or sold

• Land is an example of a fixed asset that does not depreciate – it increases in value

Landscape Equipment

• Equipment loses value over time

• For accounting purposes:– Landscape equipment will last 7 years– Cars & trucks will last 5 years

• The cost of the equipment is divided by its expected life to find the amount that it depreciates each year.

Salvage Value

• Equipment that is older than the set depreciation time has a value called “salvage value”. This is what it can be sold for when it is past its useful life

• In reality – a lot of equipment is fully functional when it is older than its depreciation schedule.

• The depreciation schedule is not like a blue book value. It doesn’t calculate what you can sell it for. It is for accounting purposes.

Example

• You purchased a 60” Toro Zero Turn in 2009 for $4,500. Its salvage value is $250

• Formula for yearly depreciationNew Price – Salvage Value

Total years• How much is it worth in 2010?

– Equipment Depreciates in 7 years– (4,500 – 250)÷7= $607.14– 4,500 – 607.14 = $3,892.86

• How much will it be worth in 2011? (2years old)– 4,500 – (2 x 607.14) = $3,285.72

How much is it worth?

• You purchased an Echo string trimmer for $350 in 2008. It’s salvage value is $15.

• What is it valued at in 2010?

• Formula for yearly depreciationNew Price – Salvage Value

Total years

How much is it worth?

• You purchased a used truck in 2008. It is a 2000 Ford F250 4WD. It was $25,000 new, but you paid $7,500 for it.

• Do you use 2000 and $25,000 or 2008 and 7,500 for your calculation?

• Answer: Use the value and age since you have owned it.

Use your values

• Depreciate your price: $7,500, less the salvage value ($500) for 5 years since it is a truck.

• Calculate its value in 2010, show your work on the worksheet.

Answer

• You should have gotten $4,700.