Double Declining Balance Method Example 2

Double Declining Balance Method Example 2

1. double declining balance method

Cost of asset = $800,000
Estimated residual value = 10% of the cost
Estimated useful life of asset = 5 years

Depreciation rate = (1/useful life) x 200%
= 1/5 x 200% = 20% x 2 = 40%


Example 2 Summary

Year	Cost	Depreciation Rate	Depreciation	Accumulated Depreciation	Book Value
1	$800,000	40%	$320,000	$320,000	$480,000
2		40%	$192,000	$512,000	$288,000
3		40%	$115,200	$627,200	$172,800
4		40%	$69,120	$696,320	$103,680
5		40%	$23,680 (*)	$720,000	$80,000

(*) depreciation stops when book value = residual value

$800,000 x 40% = $320,000
$800,000 - $320,000 = $480,000

$480,000 x 40% = $192,000
$320,000 + $192,000 = $512,000
$800,000 - $512,000 = $288,000

$288,000 x 40% = $115,200
$512,000 + $115,200 = $627,200
$800,000 - $627,000 = $172,800

$172,800 x 40% = $69,120
$627,200 + $69,120 = $696,320
$800,000 - $696,320 = $103,680

$103,680 - $80,000 = $23,680
$696,320 + $23,680 = $720,000
$800,000 - $720,000 = $80,000