How to Depreciate Trailers

Trailers often represent fixed assets in accounting terms. The items bring value to a company for more than one accounting period in general. Depreciation is representational expense that a company records to show the use for a trailer during the accounting period. Accountants are responsible for trailer depreciation. Different methods exist for how a company can compute depreciation. The two most common, however, are straight line and modified accelerated cost recovery system. The first method is for accounting purposes and the second for tax purposes.

Straight Line

Compute the historical cost for the trailer by adding together the purchase price and associated costs for putting the asset into service.

Determine the trailer’s salvage value, if any. The salvage value represents money a company can receive when disposing of the asset. Accountants may need to make a judgment call on this figure.

Review the number of years of useful life the trailer will provide. This is either a standard industry figure or one closely associated with the trailer.

Subtract the salvage value from the trailer’s total historical cost. Divide this figure by the useful life of the trailer to compute the annual depreciation figure.

MACRS

Review the current MACRS tables released by the Internal Revenue Service.

Find the depreciation percentages most closely associated with the current trailer.

Multiply the depreciation percentage by the trailer’s historical cost. This represents the annual depreciation for the first year.

Subtract the first-year depreciation from the historical cost. Multiply the difference by the second-year depreciation percentage to compute the second-year depreciation figure.

Continue this process following the MACRS table until the trailer’s historical value is zero.

References

  • "Intermediate Accounting"; David Spiceland, et al.; 2007

About the Author

Kirk Thomason began writing in 2011. In addition to years of corporate accounting experience, he teaches online accounting courses for two universities. Thomason holds a Bachelor and Master of Science in accounting.