Double-Declining Depreciation Formula

Double-Declining Depreciation Formula

See Also:
Double-Declining Method Depreciation

Double-Declining Depreciation Formula

To implement the double-declining depreciation formula for an Asset you need to know the asset’s purchase price and its useful life.
First, Divide “100%” by the number of years in the asset’s useful life, this is your straight-line depreciation rate. Then, multiply that number by 2 and that is your Double-Declining Depreciation Rate. In this method, depreciation continues until the asset value declines to its salvage value.
Use the following formula to calculate straight-line depreciation rate:

Straight-line Depreciation Rate = Depreciation Expense / Depreciable Base

Use the following formula to calculate double-declining depreciation rate:

Double-declining Depreciation Rate = Straight-line Depreciation Rate x 2

Double-Declining Method Calculation Example:

Fedcorp Industries made a purchase of a delivery van to transport merchandise. The van purchase price is $1,000. Fedcorp also determines that the van’s will retain a useful life of 5 years. Using the information that the company has determined, how would Fedcorp Industries determine the double-declining depreciation rate on the delivery van?

First Divide 100% by 5 years
100% / 5 = 20%
Then, multiply that percentage by 2
20% x 2 = 40%
Your Double-Declining Depreciation rate is 40% . Which translates to depreciation of $400 per year for the company’s van.
Stop Calculating depreciation in the year after the depreciable cost falls below the salvage value of the vehicle.

supplier power

ARTICLES YOU MIGHT LIKE

The Struggles of Private Company Accounting

Hiring the right accountant  When I meet a business owner operating at a successful $10 million in revenue, they often mention, “My CPA”… I immediately know that CEO/Entrepreneur is referring to their Tax CPA.  That is because one thing that all Entrepreneurs have in common is that they must file a tax return.  So, from

Read More »

Financial Ratios

See also:Quick Ratio AnalysisPrice to Book Value AnalysisPrice Earnings Growth Ratio AnalysisTime Interest Earned Ratio Analysis Use of Financial Ratios Financial Ratios are used to measure financial performance against standards. Analysts compare financial ratios to industry averages (benchmarking), industry standards or rules of thumbs and against internal trends (trends analysis). The most useful comparison when

Read More »

CPA’s are Specialized

The Difference in CPAs Looking back at my career I don’t know how many times I have introduced myself to someone and they ask, “Are you a CPA?” and I say yes. Then they tell me “you must be very busy with tax season” and I look at them with a bit of awe and

Read More »

JOIN OUR NEXT SERIES

Financial Leadership Workshop

MARCH 28TH-31ST 2022

THE ART OF THE CFO®

Financial Leadership Workshop

Days
Hours
Min

September 12-15th 2022

Days
Hours
Min
SHARE THIS ARTICLE

JOIN THE NEXT STRATEGIC CFO™ WORKSHOP SERIES

Strategic CFO™ Financial Leadership Workshop
The Art Of The CFO®

Days
Hours
Min

September 12-15th 2022