3.2.15 Service-Out Method

This method depends on the time period over which the equipment operates. For example, drilling equipment or digging tunnels where the rate of depreciation is associated with use. Assume that the cost of the equipment is around $12,0000 and the value of the equip­ment when sold at the end of the project, which is at the dig about 15,0000 meters, is $6000. In this case, we calculate the depreciation rate from the following equation:

Depreciation rate = (120000-6000) / 150000 = 0.76 $ / m.

Therefore, it is used to calculate the value of the equipment after the first year, as it is known that the equipment was used to drill a total depth equal to 30,000 m, as shown from the following equation:

Value of the equipment = 120000 – (0.76 x 30000) = $97,200.