6 BULLETIN" 660, U. S. DEPARTMENT OF AGRICULTURE. 
The third method is called the sinking-fund method. It is based 
on the assumption that the depreciation on a structure at any time 
is equal to the accumulations of a sinking fund established for renewal 
at the end of its useful life. The depreciated value plus this sinking 
fund (actual or imaginary) at any period equals the original cost. 
COMPARISON OF DEPRECIATION FORMULAS 
USEFUL LIFE IN YEARS 
Fig 1. 
It should be observed that none of these formulas takes into con- 
sideration interest on investment, output, cost of operation, or main- 
tenance charges. Figure 1 gives a graphic comparison of the above 
formulas. 
The following table is a comparison of the annual depreciation on 
a $600 machine that has an assumed useful life of five years. It also 
is assumed that at the end of this period it will have a scrap value of 
$100. The annual depreciation is computed by the three formulas 
described : 
Comparison of three methods of computing depreciation. 
Years. 
Straight- 
line 
method. 
Diminish- 
ing-value 
method. 
Sinking- 
fund 
method, 
6 per cent 
interest. 
First 
sioo 
100 
100 
100 
100 
$180. 72 
126. 28 
88. 25 
61.67 
43.08 
$88. 70 
94.02 
99.66 
105. 64 
119.98 
Second. 
Third 
Fourth 
Fifth 
Total 
500 
500.00 
500. 00 
