Think you Know Depreciation, think again!
Submitted by brian mahon on Fri, 09/18/2015 - 05:27
You may know this but I didn't. I know what straight line depreciation is and my reading tells me that double decling is 2 x Straight line. BUT this is not so! (I have verified this from more than one source including Cornelius Fitchner).
Look below - Straight Line is $9,000 annually in this case and so I assumed that DDL would be $18,000 - but look below and notice the two columns compared. Read the definition closely.
Good Luck.
| Straight-Line (10% of begin-salvage every year) |
Double-Declining (20% of year\'s beginning book value every year) |
| -- | Depr | Book | Accum | Depr | Book | Accum |
| 1 | 9,000 | 91,000 | 9,000 | 20,000 | 80,000 | 20,000 |
| 2 | 9,000 | 82,000 | 18,000 | 16,000 | 64,000 | 36,000 |
| 3 | 9,000 | 73,000 | 27,000 | 12,800 | 51,200 | 48,800 |
| 4 | 9,000 | 64,000 | 36,000 | 10,240 | 40,960 | 59,040 |
| 5 | 9,000 | 55,000 | 45,000 | 8,192 | 32,768 | 67,232 |
| 6 | 9,000 | 46,000 | 54,000 | 6,554 | 26,214 | 73,786 |
| 7 | 9,000 | 37,000 | 63,000 | 5,243 | 20,972 | 79,028 |
| 8 | 9,000 | 28,000 | 72,000 | 4,194 | 16,777 | 83,223 |
| 9 | 9,000 | 19,000 | 81,000 | 3,355 | 13,422 | 86,578 |
| 10 | 9,000 | 10,000 | 90,000 | 3,422 | 10,000 | 90,000 |
| Source: "Financial Accounting", John. J. Wild |
| Figure 2: Begin 100,000, Salvage 10,000 |
Read more: Depreciation: Straight-Line Vs. Double-Declining Methods http://www.investopedia.com/articles/06/depreciation.asp#ixzz3m46QmS3W
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