DISCLAIMER: The contents of this guidance document does not have the force and effect of law and is 

not meant to bind the public in any way. This document is intended only to provide clarity to the 

public regarding existing requirements under the law or agency policies.

UNITED STATES DEPARTMENT OF AGRICULTURE 

Rural Utilities Service 

BULLETIN 183-1 

RD-GD-1977-04

SUBJECT: Depreciation Rates and Procedures

EFFECTIVE DATE: January 1, 1978. 

OFFICE OF PRIMARY INTEREST: Assistant Administrator, Electric Program. 

FILING INSTRUCTIONS: This bulletin revises RUS Bulletin 183-1 "Depreciation Rates and 

Procedures" dated November 3,1969. Suggestion to borrowers: Distribute copies of this bulletin to all 

units responsible for elements of the report. 

PURPOSE: This bulletin is issued to aid borrowers in their accounting for depreciation. Specific rates 

are prescribed for production and transmission plant. Ranges of rates are prescribed for distribution 

plant and recommended for general plant. A method is furnished for borrowers to appraise their 

reserve ratio for distribution plant. Borrowers may continue to use rates which have received specific 

REA approval since January 1, 1967. Otherwise, no deviations are to be made from these depreciation 

procedures and prescribed rates with-out specific approval of REA except where other rates or 

procedures are required by a regulatory agency having juris-diction over the borrower. Borrowers 

under commission jurisdiction should inform REA of depreciation rates prescribed by the 

Commission.
UNITED STATES DEPARTMENT OF AGRICULTURE

Rural Electrification Administration

October 28, 1977

REVISION OF REA BULLETIN 183-1 

Attached is revised REA Bulletin 183-1, Depreciation Rates and Procedures.

Depreciation rates and procedures prescribed in this bulletin are effective January 1, 1978. However, borrowers wishing to make the changes

retroactive to January 1, 1977, may do so. Borrowers may continue to use

those rates which REA has approved on the basis of special studies.

A recent review of current industry depreciation rates and practices indicates REA's prescribed rates for generation and transmission and the

ranges of rates for distribution plant are generally in agreement with

current industry data. The review did indicate an upward trend in certain

prescribed rates which have been reflected in the new rates as follows:

1. The prescribed rate for steam production plant is changed from 2.82

percent to 3.10 percent.

2. The prescribed rate for transmission lines is changed from 2.60 percent to 2.75 percent. If communication equipment is not "significant"

(see page 14) borrowers may now use a composite rate of 2.75 percent

for all transmission plant.

3. The prescribed range of rates for Account 364, Poles, Towers and

Fixtures is changed from a range of 3.0 to 3.5 percent to a range

of 3.0 to 4.0 percent.

The revised bulletin requires that the accumulated provision for depreciation of distribution plant be analyzed on at least an annual basis. The

only other major change in the bulletin is the clarification {page 14, B)

of the handling of depreciation rates for nuclear production plant.

To eliminate some apparent confusion, the following points concerning

this bulletin are emphasized.

1. REA will not object to the use of the "unit method" of depreciation

for "General Plant," where the board of directors approve of this

procedure as being necessary to meet their management needs.

2. The use of REA approved rates for general plant has not been necessary

since the 1969 revision of Bulletin 183-1. We recommend that borrowers

use the range of rates for general plant provided in the bulletin.

However, a rate based upon the experience of the cooperative, representing the estimated service life and salvage is satisfactory.

Attachment

UNITED STATES DEPARTMENT OF AGRICULTURE

Rural Electrification Administration

October 28, 1977

Supersedes 11/3/69

REA BULLETIN 183-1 

SUBJECT: Depreciation Rates and Procedures

I. General: This bulletin is issued to aid borrowers in their

accounting for depreciation. Specific rates are prescribed

for production and transmission plant. Ranges of rates are

prescribed for distribution plant and recommended for general

plant. A method is furnished for borrowers to appraise their

reserve ratio for distribution plant. Borrowers may continue

to use rates which have received specific REA approval since

January 1, 1967. Otherwise, no deviations are to be made

from these depreciation procedures and prescribed rates without specific approval of REA except where other rates or

procedures are required by a regulatory agency having jurisdiction over the borrower. Borrowers under commission

jurisdiction should inform REA of depreciation rates

prescribed by the Commission.

II. Depreciation Defined: Depreciation is defined in the REA

Uniform System of Accounts as "the loss in service value of

depreciable plant not restored by current maintenance resulting

from causes against which no insurance is carried, such as wear

and tear, decay, action of the elements, inadequacy, obsolescence,

changes in the art, changes in demand, and requirements of public

authorities."

III. Objectives of Depreciation Accounting:

A. The objective of depreciation accounting is to charge to

expense the capital investment in certain fixed assets,

less salvage at time of retirement, over their useful

lives. Thus it may be said that the cost of capital

investments in plant is recovered by means of proper

depreciation accounting. The useful life of such assets

is dependent upon such factors as use, misuse, maintenance

and obsolescence. The charge to expense is accomplished

by establishing depreciation rates as a percentage. This

percentage is applied to the asset cost to yield a monthly

or annual amount of depreciation expense.
Bulletin 183-1 

 Page 2

B. Depreciation accounting provides for the systematic,

periodic writedown or allocation of the cost of a

limited-life asset or asset group. The established

rate of depreciation should recognize useful life

and recovery values. Depreciation is not intended

to provide funds for replacement, nor is it to be

legitimately considered as a means to make a desirable

showing on the revenue and expense statement.

IV. Methods of Depreciation:

A. REA recommends the straight-line method of computing

depreciation for use by its borrowers to provide uniform

accounting and reporting practices. The REA Uniform

System of Accounts defines straight-line depreciation as

"a method for periodically computing the expense represented by loss in service value of depreciable plant,

under which the objective is to prorate such loan in

equal installments over the estimated or remaining

estimated service life."

B. The REA Uniform System of Accounts, in conformity with

the practice of electric and other utility industries,

provides for the use of composite rates tor each class

of property including general plant. This is commonly

referred to as "group method depreciation." Although

the use of the unit method of computing depreciation is

not consistent with general utility practices nor recognized in the Uniform System of Accounts Prescribed

for Electric Borrowers of the Rural Electrification

Administration (REA Bulletin l81-1), REA will not object

to this method of computing depreciation for general

plant where boards of directors approve this procedure

as being necessary to meet their management needs.

The group method differs from the unit depreciation

method in that a number of units of property are

grouped for depreciation accounting purposes;

depreciation is computed for the whole group. The

units may be grouped by primary accounts or by

functions, the essential requirement being that the

property included in each group have some homogeneity.

Under the group method, when retirement of a depreciable unit of plant occurs, the coat of the unit

less net salvage is charged to the appropriate

accumulated provision for depreciation account. No
Bulletin 183-1 

 Page 3

recognition is given to so-called gain or loss until all

the units included in the particular group are abandoned.

V. Depreciation Guideline Curves - Distribution Plant: The ratio

of the accumulated provision for depreciation to gross plant

in service (reserve ratio), has been widely recognized as an

important measure of the propriety of depreciation rates and

practices. Guideline curves are supplied in Section V.C. for

use as a screening tool to determine whether a borrower's

reserve ratio is consistent with normal experience. Using the

procedure outlined in V.C. below, the cooperative should, on

an annual basis, prepare an analysis of the adequacy of its

accumulated provision for depreciation of distribution plant.

This analysis should be maintained in the cooperative files

and be made available for review by REA field personnel.

A. Underlying Theory:

1. Electric distribution plant is an example of a "continuous class" of property, consisting of many individual

units of property, each of which is replaced when it

reaches the end of its useful life. For such a "continuous class" of property, and with proper depreciation

accounting, the reserve ratio for a particular company

will be determined by the following factors:

a. Its history of growth.

b. Its age.

c. Its experience with respect to retirements and

replacements. This involves not only the average

useful life of the plant, but also the dispersion

in the average useful life of the individual plant

items.

d. Its experience with net salvage.

e. Its rate of depreciation.

2. The depreciation guideline curves are a simplified

application of this underlying theory. The factor

of growth is taken into account by the horizontal

scale at the bottom of the chart which is a ratio

comparing the present plant with plant ten years ago.

The factor of age is taken into account by the fact

that the curve is recommended for use only by borrowers with an elapsed age since energization of at

least 20 years. The factors of experience with replacements and salvage are taken into account by the

provision of a range between maximum and minimum
Bulletin 183-1 

 Page 4

which encompasses the range in average life and in

patterns of replacement dispersion which is most

commonly experienced by REA borrowers. These ranges

were determined by reference to industry experience,

both public and private, and through simulated plantrecord analyses made of a number of REA borrowers.

The applicability of the basic factors of growth,

age, and history of retirements to REA distribution

borrowers' reserve ratios has been confirmed by

statistical analysis, and it has been determined

that the experience of most distribution borrowers

which have followed good depreciation accounting

practices will place their reserve ratio within

the "normal" area between the maximum curve and

the minimum curve.

3. It will be noted that there is a considerable spread

between the maximum and the minimum guideline curves.

It is significant that conditions which may result in

fairly high reserve ratios for certain borrowers at

the present time should lead to lower reserve ratios

as these borrowers become older. It is more likely,

therefore, that in later years the maximum curve may

be lowered.

B. Application of Depreciation Guideline Curves:

1. Depreciation guideline curves can be used very easily

by the borrower. Following the detailed procedure for

use of the guideline curves (Section V C), the reserve

ratio and rate of growth or distribution plant in service are determined for the latest ten year period.

Reference to the depreciation guideline curves will

immediately indicate whether the borrower's reserve

ratio lies between the maximum and minimum curves for

plant growing at such a rate.

2. If a borrower is above the maximum, or below the minimum, this is an indication of an unusual condition

which warrants a more detailed study. Such a study

may indicate need for correction in accounting

procedures or a change in depreciation rates or

both. In some instances, detailed study may reveal

exceptional conditions which justify the unusually

high or low reserve ratio.
Bulletin 183-1 

 Page 5

3. It is also important to consider the change in the

reserve ratio during the last several years, and the

future reserve ratio as predicted in a long range

financial projection. If the reserve ratio is below

the minimum curve, but increasing, and if the financial projection indicates that it will soon reach the

minimum curve, no corrective action may be required,

though subsequent progress should be watched to see

that it corresponds to the estimates.

4. Similarly, if the reserve ratio falls between the

maximum and minimum guide curves, but the financial

projection indicates that the reserve ratio is

expected to increase within a few years to a point

well above the maximum curve, a special study of the

depreciation practices shou1d be made to determine

whether there is a need for corrective action.

C. Procedure for Use of the Depreciation Guideline Curves:

1. The chart which follows, shows depreciation guideline

curves with suggested levels of depreciation reserve

ratios at various growth rates. The solid curves

indicate the upper and lower limits of normal reserve

ratios for distribution plant. The curve shown by

dashes indicates the optimum level of reserve ratios

which might be expected in the case of a typical

distribution borrower.

2. To check the accumulated provision for depreciation of

distribution plant against the depreciation guideline

curves, four steps are necessary:

a. Determine whether the elapsed age since energization is at least 20 years. If it is less than 20

years, the guideline curves are not applicable.

b. Determine the current reserve ratio by dividing

the accumulated provision for depreciation on distribution plant by the distribution plant in service. Typical figures might be $855,220 divided by

$2,861,150, which gives a reserve ratio of 29.9%.

c. Determine the ratio of current distribution plant

in service to distribution plant in service ten
Bulletin 183-1 

 Page 6

years before. To do this, divide the current

distribution plant in service by the distribution

plant in service ten years earlier. Typical

figures might be $2,861,150 divided by $1,540,350,

which gives a ratio of 1.86.

d. Refer to the depreciation guideline curves. For

a ratio of current distribution plant in service

to distribution plant 10 years ago of 1.86, the

maximum curve is about 32% and the minimum curve

is about 21%. The example of 29.9%, in paragraph

2 above, lies within this range.

3. It may be desirable to use the depreciation guideline

curve with a growth period of more than 10 years. In

that case, it will be necessary to use compound interest tables to obtain the average annual compounded

rate of growth of distribution plant in service for

the particular number of years involved. Then the

horizontal scale at the top of the chart will be

used.

4. References: For general information on depreciation of

a "continuous class" of property, see Report of the

Committee on Depreciation, 1960, National Association

of Railroad and Utilities Commissioners. For information on the "Iowa Curves" of plant mortality dispersion,

which were used in the development of the REA depreciation guideline curve, see Statistical Analysis of Industrial Property Retirements by Robley Winfrey, Iowa

Engineering Experiment Station, Bulletin No. 125,

1935, and Depreciation of Group Properties by Robley

Winfrey, Iowa Engineering Station, Bulletin No. 155,

1942. For information on the simulated plant-record

and other methods of life analysis, see Methods of

Estimating Utility Plant Life, Publication 51-23,

Published 1952, Edison Electric Institute. A more

extensive bibliography can be obtained from REA on

request.
Bulletin 183-1 

 Page 6
Bulletin 183-1 

 Page 8

VI. Prescribed Depreciation Rates for Distribution Plant: The table

below (paragraph C) sets forth the range of depreciation rates

for distribution plant. Within this range each borrower should

select the rate, or rates, which in its judgment would be

most suitable in measuring expiration of the service life of

its depreciable plant on a straight-line basis. Such judgment

is essential since depreciation rates cannot be determined

precisely through application of exact formulas.

A. Calculation of Composite Depreciation Rates for Groups:

The primary plant accounts required by the REA Uniform

System of Accounts represent groupings of plant units

which are suitable for depreciation accounting purposes.

Although not all units in a given account have identical

characteristics or similar service lives, it is possible

to calculate a composite rate for each primary account and,

in turn, by utilizing the rates for each primary account

to arrive at a composite rate for a functional group, such

as distribution property. The rate for a primary account

is computed by first determining a rate for each group of

similar materials within an account; secondly, the cost

of each group of similar materials is multiplied by the

rate selected for that group; and finally, the products

of these multiplications are totaled and divided by the

balance in the primary account. This same procedure is

followed in determining the composite rate for the functional group; that is, the balances in the respective

primary accounts are multiplied by the individual rates

selected for the various accounts and the products added

to arrive at a total which, divided by the aggregate cost

of the depreciable plant accounts involved, produces a

composite rate for the functional group.

B. Selection of Appropriate Rates Within Range:

1. Review Composition of Each Account: Rates for individual accounts, within the ranges set forth in

Section VI.C. below, are to be used in calculating

composite rates for functional plant groups. In

selecting the rates for individual accounts, plant

accounts should be reviewed to determine the composition of each. (For example, in Account 364,

Poles, Towers and Fixtures, the types and relative

proportions of poles, crossarms, and anchor-guys

should be ascertained.) Estimates should be made

as to the expected life, removal costs and material
Bulletin 183-1 

 Page 9

to be salvaged for the various types of material

comprising the property in each account. These

data will form a basis for judgment as to the

rate of depreciation within the recommended range

to be applied to each account in computing the

composite rate for the functional group.

2. Consider External Factors: Differences in geographical location, climate, operating practices, maintenance policy, load conditions and similar factors may

justify differences in depreciation rates since any

of these variables may affect or limit the service

life of distribution plant.

a. Factors and conditions contributing to the use

of the upper range of the rate for poles would

be (1) growing conditions favorable for decay,

fungi (and vegetation in general) such as in

southeastern states with high average humidity

and rainfall, or where irrigation and crop

fertilization are widely practiced and (2)

large numbers of substandard poles such as

were produced in 1946 through 1948.

b. Factors and conditions contributing to the use

of the lower range of the rate tor poles are

growing conditions that are slow or poor; for

example, in dry and unirrigated areas, in

northern states and at higher altitudes.

3. Select Rate for Each Account Within the Range: It

is recommended that borrowers whose systems are

operated under normal conditions select a rate for

each account which is near the middle of the range.

For systems operating under extreme conditions, such

as prevail in coastal or sleet areas, or in extremely

arid localities, the rate should be selected from

near the top or bottom of the range as appropriate.

However, in no case should the low end nor the high

end of the range be selected unless extraordinary

conditions exist which lead to long or to

exceptionally short service life.

Illustrations of rate computations and accounting

procedures to be followed by borrowers are included

in the Appendix.
Bulletin 183-1 

 Page 10

4. Review Prior Practices:

Consideration should be given to adjusting rates to

compensate for the under or over accumulation of the

provisions for depreciation resulting from inadequate

accounting practices, procedures or improper rates.

The guideline curves discussed in Section V above

provide a basis for evaluating the need for changes

in depreciation rates for distribution plant.

For instance, when it is determined that the accumulated provision for depreciation is excessive

because high depreciation rates have been used,

or incorrect accounting has been followed, corrective

action should be taken. Accounting procedures

should be checked and, if necessary, corrected.

It may be necessary to reduce the depreciation

rate. The reduction should be sufficient to bring

the reserve ratio into line with the depreciation

guideline curves on a gradual basis over a number

of years.

C. Range of Rates - Distribution Plant:

Acct.

No. Account

Annual 

Depreciation Rate

361

362

364

365

366

367

368

369

370

371

372

373

Structures and Improvements

Station Equipment

Poles, Towers, and Fixtures 

Overhead Conductor and Devices 

Underground Conduit

Underground Conductor and Devices 

Line Transformers

Services 

Meters

Installation on Consumers' 

Premises

Leased Property on Consumers' 

Premises

Street Lighting and Signal 

Systems

See Account 390

2.7 - 3.2%*

3.0 - 4.0%

2.3 - 2.8%

1.8 - 2.3% 

2.4 - 2.9%

2.6 - 3.1% 

3.1 - 3.6%

2.9 - 3.4% 

3.9 - 4.4%

3.6·- 4.1%

3.8 - 4.3%

* Power type borrowers should use 2.88 for distribution

station equipment.
Bulletin 183-1 

 Page 11

Requests for REA approval to use rates below or above the

composite rate computed by using the ranges recommended

must be supported by a clear statement of the factors and

conditions which justify such rates.

VII. Recommended Depreciation Rates for General Plant: The table

below sets forth the range of recommended depreciation rates

for general plant.

General plant is subdivided into six functional groups for

depreciation purposes. Separate decimal subaccounts of the

accumulated provision for depreciation of general plant should

be maintained for each group. The six groups and the ranges

of rates are:

Functional Group

Structures and Improvements

Office Furniture and Equipment

Transportation Equipment

Power Operated Equipment

Communications Equipment

Other General Plant

 Annual

Depreciation Rates

2.0 – 3.0%

5.0 - 7.0%* 

14.0 - 17.0%

11.0 - 16.0%

5.0 – 8.0%

3.6 - 6.0%

A. Account 390, Structures and Improvements:

A composite rate should be computed for this account by

selecting a rate appropriate for each structure recorded

in it. A new composite rate should be computed when a

structure is added or deleted. A rate at or near the

lower side of the range should generally be used when

structures are new or of masonry construction or in areas

normally having favorable climatic conditions. A rate at

or near the upper side of the range should normally be

used when structures are frame type construction, or

remodeled or in areas subject to severe climatic conditions.

B. Account 391, Office Furniture and Equipment:

In the computation of a composite rate, office furniture

and equipment may be divided into three groups: (a)

furniture and miscellaneous office fixtures and equipment,

*Upper limit of range increased to 12.5% when data processing

and automatic accounting machines are included.
Bulletin 183-1 

 Page 12

(b) office machines such as addressographs, typewriters, calculators and adding machines, and (c)

data processing equipment and automatic accounting

machines. If data processing equipment and automatic

accounting machines are included, the annual composite

rate may be greater than 7.0% but it should not exceed

12.5%.

To the amount of each group mentioned above a rate

within the following ranges should be applied:

Furniture and Miscellaneous Office Fixtures

 and Equipment

Estimated 

Service

Life-Years

15 to 25

Range

Depreciation

Rate

4.0 to 6.0%

Adding Machines, Type- 

 writers, Addressographs

 and Calculators 9 to 15 6.0 to 10.0%

I 

Data Processing Equipment

 and Automatic Accounting

 Machines 6 to 10 10.0 to 16.0%

C. Account 392, Transportation Equipment:

The computation of annual depreciation on a composite

basis may be in accordance with the following schedule:

 Estimated

Estimated Percent Range Service Salvage Depreciation

Type Life-Years Value Rates 

Automobiles 3 to 5 20 to 40 16.0 to 20.0%

Pickups, Light

Trucks, including 

Auxiliary Equipment 4 to 6 10 to 30 15.0 to 17.5%

Heavy Trucks, including Auxiliary

Equipment 5 to 10 Zero to 20 10.0 to 16.0%

Trailers 8 to 14 Zero 7.0 to 12.5%
Bulletin 183-1 

 Page 13

D. Account 396, Power Operated Equipment:

Ordinarily, depreciation should be computed on this

account using an appropriate composite rate. However, units of exceptionally high cost which are

used only occasionally, should be depreciated on a

time basis, subject to a minimum monthly charge.

Estimated life and salvage should be used in arriving

at the time rate.

E. Account 397, Communications Equipment:

A composite depreciation rate on the low side of the

range should be selected if towers and base stations

for two-way radio systems and miscellaneous equipment

represent a larger portion of the account balance.

If, on the other hand, mobile radio units represent

a larger portion of the balance, a rate on the high

side should be used. When the account contains a

considerable investment in such items as telephone,

carrier, or supervisory and load control equipment

properly included in general plant, a rate on the

low side of the range should be used.

F. Other General Plant:

This group includes Accounts 393, Stores Equipment;

394, Tools, Shop and Garage Equipment; 395,

Laboratory Equipment and 398, Miscellaneous Equipment.

VIII. Prescribed Depreciation Rates for Production and Transmission

Plant: The tables below set forth the depreciation rates for

various types of production and transmission plant. These

rates are to be used by borrowers and REA except where

regulatory commissions prescribe other rates or unusual

conditions justify special rates. A detailed depreciation

study should be made for the special cases and submitted

to REA for approval of appropriate rates. The rates shown

below should be used unless the special rates as determined

by the study are more than 0.1 percentage point greater or

less than the recommended rates.
Bulletin 183-1 

 Page 14

B. Rates for Production Plant:

Functional Group

or Type of Facility

Steam Production

Diesel Production

 720 RPM and below

 Above 720 RPM

Hydro Production

Gas Turbine Production

Annual Depreciation

Rate 

3.10%

3.00%

7.00%

2.00%

3.00%

Nuclear Production

A proposed composite rate for nuclear production

plant shall be submitted to REA for approval. For

joint participation projects in which the borrower

is a minor participant, the rate being used by the

other participant(s), shall be used. Justification,

including supporting studies and regulatory commission's order, for the proposed rate, shall be submitted to REA.

C. Rates for Transmission Plant:

Functional Group

or Type of Facility

Transmission Lines

Transmission Station

 Equipment

Annual Depreciation

 Rate 

2.75%

2.75%

When the amount of communication equipment recorded

in Account 353, Station Equipment, is significant

(7.5 percent or more of the account total), the

depreciation on the communication equipment is computed using the same rate used for Account 397, 

Communication Equipment.

D. Depreciation Rates for Production and Certain Transmission

Facilities to be Included in Loan Agreements:

1. To assure consistency in the use of depreciation rates

by REA in its review and analyses of loan applications

and by the borrower in its computation of depreciation

expense, loan agreements, where production or certain
Bulletin 183-1 

 Page 15

transmission facilities are involved, will include

a provision that the borrower (a) shall adopt as

its depreciation rates only those which have previouslv been approved for the borrower by the Administrator unless other depreciation rates are required

by regulatory bodies having jurisdiction in the 

premises, and (b) shall not file with or submit for

approval of regulatory bodies any proposed depreciation rates which have not previously been approved

for the borrower by the Administrator.

2. Loan agreements will contain the above provisions for

transmission facilities when:

a. The borrower will own both generation and transmission facilities; or

b. When more than 50 percent of the borrower's plant

investment is in transmission facilities; or

c. When REA determines in other cases that the depreciation rates should be specified in the loan agreement.

IX. Periodic Review:

Depreciation guideline curves should be used to evaluate the

adequacy of current depreciation practices and rates for distribution plant. Under the group method of depreciation, it

is especially necessary to re-examine depreciation accounting

practices periodically. (Every year is recommended for general

plant.) Incorrect accounting procedures found should be corrected immediately. Rates should be altered where necessary to

give effect to justifiable changes in estimates of service life

or net salvage. When frequent reviews are made only modest

changes in depreciation rates are necessary to keep the reserve

ratio in line with the guideline curves.

Acting

Administrator

Attachment:

Appendix – Illustrations of Rate Computations and Accounting

 Procedures to be Followed by Borrowers

Index:

DEPRECIATION:

Rates and Procedures
Bulletin 183-1 

 Page 16

APPENDIX

ILLUSTRATIONS OF RATE COMPUTATIONS AND ACCOUNTING PROCEDURES TO BE

 FOLLOWED BY BORROWERS

l. Calculating a composite rate for distribution plant:

a. Showing effect of change in rate for each primary account:

Account Balance Rate A

Depreciation

 Amount A Rate B

Depreciation

Amount B

362 $30,000 2.7% $ 810 3.2% $ 960

364 340,000 3.0 10,200 4.0 13,600

365 290,000 2.3 6,670 2.8 8,120

368 210,000 2.6 5,460 3.1 6,510

369 50,000 3.1 1,550 3.6 1,800

370 40,000 2.9 1,160 3.4 1,360

$960,000 $25,850 $32,350

$25,850 ÷ $960,000 = 2.7%, composite rate A

$32,350 ÷ $960,000 = 3.3%, composite rate B

b. Showing effect of change in composition of functional plant 

group with reference to respective proportions of cost in the

various primary accounts:

Account Rate Balance A

Depreciation

Amount A Balance B

Depreciation

Amount B

362 2.7% $ 30,000 $ 810 $ 20,000 $ 540

364 3.5 340,000 11,900 375,000 13,125

365 2.3 290,000 6,670 280,000 6,440

368 2.6 210,000 5,460 125,000 3,250

369 3.6 50,000 1,800 100,000 3,600

370 3.4 40,000 1,360 60,000 2,040

$960,000 $28,000 $960,000 $28,995

$28,000 ÷ $960,000 = 2.9, composite rate A

$28,995 ÷ $960,000 = 3.0, composite rate B
Bulletin 183-1 

 Page 17

 Appendix

2. Calculating a composite rate for transportation equipment:

$12,600 ÷ $80,000 = 15.8% composite rate

3. Accounting procedure for trade-in of truck: (Note that under the

group depreciation procedure the net book cost of any particular

item of general plant is not ascertainable, as depreciation charges

are not allocated to the individual items as is done under the unit

depreciation method.)

a. Given a situation in which a truck with original cost of $2,000

is traded for a $2,600 new truck, with $600 being allowed on

the old truck:

b. Accounting procedure:

Account 392

Transportation Equipment

17,000 2,000 (a)

(b) 2,600

Account 108.7

Accumulated Provision for Depreciation of General Plant

(a) 2,000 9,000

600 (b)

Account 131

Cash-General

17,000

2,000 (b)

Equipment

Estimated

Life

QuantityTotal 

Cost

Estimated 

Salvage

Depreciable

Cost

Annual 

Depreciation

A 10 yrs. 1 $18,000 $- 0 - $18,000 $ 1,800

B 5 yrs. 6 54,000 7,200 46,000 9,360

C 4 yrs. 2 8,000 2,000 6,000 1,500

$80,000 $9,200 $70,800 $12,660