group depreciation of dissimilar assets with different service lives. Depreciation on all assets is determined by using the straight-line-depreciation method. Then, a composite depreciation rate is arrived at based on the ratio of depreciation per year to the original cost. Composite life equals the depreciable cost divided by the depreciation per year. In any given year, depreciation expense equals the composite depreciation rate times the gross cost balance in the asset account. The entry is to debit depreciation expense and credit accumulated depreciation. Under the method, when a particular asset is sold, the entry is to debit cash for the amount received and credit the asset for its original cost. The difference between the two is debited to accumulated depreciation. No gain or loss on the sale of a fixed asset is recognized under the composite method.
applying one depreciation rate to the entire asset. For example, in real estate the foundation and framing of a building may last over 50 years, whereas the electrical and plumbing systems have much shorter lives, say 20 years.
