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| Double Declining Balance Method Example 1 |
| Double Declining Balance Method Example 1 1. double declining balance method Cost of asset = $100,000 Estimated residual value = $10,000 Estimated useful life of asset = 5 years Depreciation rate = (1/useful life) x 200% = 1/5 x 200% = 20% x 2 = 40% Example 1 Summary |
(*) depreciation stops when book value = residual value [Year 1] Depreciation amount for year 1 = beginning book value x depreciation rate = $100,000 x 40% = $40,000 Accumulated depreciation at the end of year 1 = $40,000 Book value at the end of year 1 = $100,000 - $40,000 = $60,000 [Year 2] Depreciation amount for year 2 = beginning book value x depreciation rate = $60,000 x 40% = $24,000 Accumulated depreciation at the end of year 2 = $40,000 + $24,000 = $64,000 Book value at the end of year 2 = $100,000 - $64,000 = $36,000 [Year 3] Depreciation amount for year 3 = beginning book value x depreciation rate = $36,000 x 40% = $14,400 Accumulated depreciation at the end of year 3 = $40,000 + $24,000 + $14,400 = $78,400 Book value at the end of year 3 = $100,000 - $78,400 = $21,600 [Year 4] Depreciation amount for year 4 = beginning book value x depreciation rate = $21,600 x 40% = $8,640 Accumulated depreciation at the end of year 4 = $40,000 + $24,000 + $14,000 + $8,640 = $87,040 Book value at the end of year 4 = $100,000 - $87,040 = $12,960 [Year 5] Depreciation amount for year 5 = beginning book value x depreciation rate = $12,960 x 40% = $5,184 ?? [NOTE] For year 5, depreciation amount will not be $5,184. If $5,280 is depreciated, --> book value = $13,200 - $5,184 = $7,776 --> book value < residual value Depreciation stops when book value = residual value --> depreciation amount for year 5 = $2,960 --> book value = $12,960 - $2,960 = $10,000 Back to Overview of Depreciation |
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