Difference between revisions of "Depreciation - Double Declining Balance Method"

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===Straight Line===
 
===Straight Line===
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Under Straight line depreciation method the annual depreciation would be $4300.  The calculation is $43,000 (Amount to be depreciated) divided by 10 (years).  The table below shows the depreciation schedule.
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Under Straight line depreciation method the annual depreciation would be $18,000.  The calculation is $90,000 (Amount to be depreciated) divided by 5 (years).  The table below shows the depreciation schedule.
  
 
{| class="wikitable"
 
{| class="wikitable"
 
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|-
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! Year !! Depreciation Amount !! Accumulated Depreciation
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! Year !! Depreciation Amount !! Accumulated Depreciation!!Net Book Value
 
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| 1 || $4300 ||$4300
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| 1 || $18,000 ||$18,000||$82,000
 
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|-
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| 2 || $4300 || $8600
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| 2 || $18,000 || $36,000||$64,000
 
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| 3 || $4300 || $12,900
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| 3 || $18,000 || $54,000|| $46,000
 
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|-
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| 4 || $4300 || $17,200
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| 4 || $18,000 || $72,000||$28,000
 
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| 5 || $4300 || $21,500
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| 5 || $18,000  || $90,000||$10,000
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|-
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| 6 || $4300 || $25,800
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| 7 || $4300 || $30,100
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| 8 || $4300 || $34,400
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| 9 || $4300 || $38,700
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| 10 || $4300 || $43,000  
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|}
 
|}
  

Revision as of 10:14, 30 May 2014

Contents

Overview

Double Declining Balance Method of depreciation is one of two common methods a business uses to account for the expense of a long-lived asset. The double declining balance depreciation method is an accelerated depreciation method that counts twice as much of the asset’s book value each year as an expense compared to straight-line depreciation.

The formula is:

Depreciation for a period=2*straight line depreciation percent*[(book value at beginning of period-salvage value)-accumulated depreciation)].


Illustrations

Assumptions

  • A business purchased a machine for $100,000,
  • The estimated useful life is 5 years, and
  • The machine has a salvage value of $10,000

The amount to be depreciated would be $90,000 less the salvage value of $10,000 for a total depreciation amount of $90,000

Straight Line

Under Straight line depreciation method the annual depreciation would be $18,000. The calculation is $90,000 (Amount to be depreciated) divided by 5 (years). The table below shows the depreciation schedule.

Year Depreciation Amount Accumulated Depreciation Net Book Value
1 $18,000 $18,000 $82,000
2 $18,000 $36,000 $64,000
3 $18,000 $54,000 $46,000
4 $18,000 $72,000 $28,000
5 $18,000 $90,000 $10,000

Double Declining

Year Depreciation Accumulated Depreciation
1 $6000 $6000
Example Example Example
Example Example Example
Example Example Example
Example Example Example
Example Example Example
Example Example Example
Example Example Example
Example Example Example
Example Example Example
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