Sinking Fund Depreciation Calculator

Enter value and click on calculate. Result will be displayed.

Depreciation = Rate ( Cost - Scrap ) / ( 1 + Rate )Years

Cost of Machine:
Scrap Value:
Years:
Rate of interest on accumulated fund:
%
Yearly Depreciation:

A Depreciation – Sinking Fund Method Calculator is a tool used to calculate the depreciation of an asset while setting aside a fixed amount of money each year into a "sinking fund" — an investment meant to replace the asset at the end of its useful life. This method combines regular depreciation with interest earned on the invested funds.

How it works:

Asset Cost – The initial purchase price of the asset.
Salvage Value – The estimated value of the asset at the end of its useful life (can be zero).
Useful Life – The number of years the asset is expected to be in use.
Interest Rate (%) – The annual rate of return on the sinking fund investment.
Formula:
The annual sinking fund installment is calculated using:


Where:

r = Annual interest rate
n = Number of years of the asset's useful life
The money set aside each year earns interest, and by the end of the asset's life, the total accumulated amount (principal + interest) equals the cost of replacing the asset.

Example Calculation:

Asset Cost: $50,000
Salvage Value: $5,000
Useful Life: 5 years
Interest Rate: 5%
The calculator determines the fixed annual deposit into the sinking fund so that, with interest, it reaches the asset's replacement value by the end of its life.