SPECIAL ACCOUNTS AND ENTRIES 153 



a less annual amount of depreciation than the same rate 

 under the straight line method. Illustration 29 shows a 

 more or less hypothetical case in which the two methods 

 are compared. In this Illustration it is presumed that 

 some equipment is purchased for $1000. A rate of 10% 

 is used under the straight line method and also under the 

 diminishing value method. It is seen from the Illustra- 

 tion that under the straight line method the value of the 

 equipment at the end of ten years is zero, while under 

 the diminishing value method it is $348.68. By carrying 

 the calculations on to the end of the twentieth year under 

 the diminishing value method it is seen that the value of 

 the original equipment at that time is $121.57. 



Illustration 29 also shows that the amounts charged to 

 Equipment Expense account aggregate $1000 in ten years 

 under the straight line method at 10% while they aggre- 

 gate only $878.43 in twenty years at the same rate per cent, 

 under the diminishing value method. 



The principal point to remember in connection with 

 Illustration 29, and the comparison of results under the 

 two methods of calculating depreciation, is that a given 

 rate of depreciation does not always mean the same thing. 

 Some might say, for example, that 10% is too high a rate 

 for all equipment, having in mind that it means charging 

 off all of the value of the resource in ten years. Others 

 might say that 10% is too low a rate, having in mind that 

 even within a period of twenty years the resource is not 

 entirely charged off. 



In the case of farm equipment 10% under the diminish- 

 ing value method represents the conditions better and sim- 

 pler than with any other method or rate. The rate is easy 

 to use in calculation, and' the results interpret very closely 

 the actual wear and tear on equipment in general. Depre- 

 ciation is greater in the early years and less in the later 



