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.

 

double-declining depreciation formula

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19 Responses to Double-Declining Depreciation Formula

  1. Florence Page June 24, 2017 at 11:01 am #

    I did not understand how we got the 180

  2. Andy Vella, cpa, mba June 30, 2017 at 10:46 pm #

    $900 x 20% = $180

  3. Andy Vella, cpa, mba June 30, 2017 at 10:50 pm #

    Also, a more direct way to get to the ddd is once 5yr life is given, straight line is 20% (1:5=.2) and 20% x 2= 40%

  4. Jim August 26, 2017 at 3:29 pm #

    1000-100=900 / 5yr life = 180

  5. Natal August 30, 2017 at 12:35 pm #

    Hello. I have a question. Is it possible to calculate the purchase price with following info:

    current value of an asset (2004)= 40,000
    useful life=10 yrs
    salvage value=4,000

    Year 2004 was the third year the asset was depreciated.

    I have experience with using all methods of depreciation, but I cannot get this one right.

    • Mokotedi Thaga March 6, 2018 at 6:09 pm #

      It means the R40 000 will be R0.00 in 7 years because the useful life is 10 years. Dived R40 000 by the remaining 7 years and then you will get R5,714.29 annual depreciation. It means Accumulated Depreciation in 3 years will be (R5714.29 x 3=R17 142.88). The cost of the asset is therefor R40 000 (Current Value) + R17 142.88 (Accumulated Depreciation) = R4000 (Salvage) = R61 142.86. Now lets calculate depreciation using the cost price: R61 142.96-Salvage Value (R4000) – Depreciation for year 1 to 3 (R5714.29 x 3 = R17 142.88) = R40 000 book value.

  6. Na October 13, 2017 at 1:07 am #

    A company purchased a POS cash register on January 1 for $5,400. This register has a useful life of 10 years and a salvage value of $400. What would be the depreciation expense for the second-year of its useful life using the double-declining-balance method?

  7. Na October 13, 2017 at 1:08 am #

    can someone answer this question

  8. hh October 24, 2017 at 1:38 pm #

    100%/10 years = 10%
    10% * 2 = 20%
    $5400 * 0.20 = $1080 (depreciation year 1)
    ($5400-$1080) * 0.20 = $4320 * 0.20 = $864

  9. Edwin Atuya January 12, 2018 at 3:39 am #

    A company bought a production at a cost of sh 3.5million at the start of an accounting period.The cost of installation of the machine was sh.250000 .The machine has a salvage value of sh 500,000 .
    Prepare a depreciation schedule for the machine using the double declining method.

    Can someone answer this question for me please….

  10. love April 8, 2018 at 8:06 pm #

    how can I solve this when there is no scrap value?

  11. Dana ayman April 12, 2018 at 2:58 pm #

    In july,1,2013 X company purchased equipment and recorded it at cost.
    X company uses the double declining method, on 20 years useful life with no risidual value.
    On december,31,2015 independent abraser determined that the assets has a fair value of 77% of the cost, and 780 revaluation surplus was recorded , prepare the entry to record the revaluation of the equipment.
    Can some one answer this question ??
    And how can i solve it if i dont have a purchase cost??

    • Snowbuny April 28, 2018 at 3:29 pm #

      GAAP does not allow for marking assets up.

  12. Thomas Geno April 26, 2018 at 6:56 am #

    Really wonderful article It worked! And “Thanks, it helped me to fix my problem

  13. Jason P June 7, 2018 at 10:02 am #

    Please, for the love of God, do not calculate double-declining balance this way. It is incorrect. You do not subtract the salvage value at the beginning. Instead, you stop depreciating once you get to the salvage value. You do not depreciate beyond that point.

    The correct way of calculating DDB is to first get the depreciation RATE. Straight line for 5 years is 20%. Therefore, you double the straight-line rate for DDB, which will be 40% every year. You DO NOT subtract the $100 salvage value from the purchase price to arrive at depreciable base. Instead, you depreciate it at BOOK VALUE. Book value is purchase price net of accumulated depreciation. In year 1 your depreciation expense would be 40% of 1,000, which is $400. This begins year 2 with a remaining book value of $600. Your year 2 depreciation expense is 40% of $600, which is $240. Year 3 starts with a book value of $360. Depreciation expense of 40% comes to $144. Year 4 begins with a remaining book value of $216 ($360 – $144 = $216). Depreciation of 40% is $86.4, leaving a remaining book value of $129.6.
    July22016$

    Here is the important part. In Year 5, beginning book balance is $129.6. Remember that salvage value is $100. Our DDB depreciation rate of 40% suggests a depreciation expense of $51.84. If we to this amount of depreciation expense, our remaining book value would be $77.76, which is BELOW our salvage value. Therefore, we would only take $29.60 in deprecation for year 5, leaving our remaining book value as our salvage value of $100.

    You should note that most companies will calculate both DDB and straight-line depreciation simultaneously. They will run these calculations in parallel. The year in which converting to straight-line depreciation results in a higher depreciation expense than DDB, they will switch to straight-line. This crossover method is typically performed by subtracting the salvage value from the remaining book value of the DDB calculations. This results in a depreciable base for straight-line the rest of the way. If book value minus salvage value divided by the remaining depreciable years is higher than DDB depreciation, they will cross over to straight-line. Because they subtracted the salvage value from the book value when they switched to straight-line, this will also result in an ending book value that equals the salvage value.

    Feel free to calculate it using the method described in the article but trust me, it is incorrect. You will miss the question if you are studying for the CPA exam. You will also fail your audit and/or be out of tax compliance with the IRS.

    • Armando Garza July 11, 2018 at 2:20 pm #

      Thank you for your observation, Jason. We have now updated the Wiki to match the correct formula.

    • Madeleine Do December 11, 2018 at 12:24 am #

      saved my finals tbh

  14. Miiro badru December 4, 2018 at 3:07 pm #

    Can someone answer this too

    1. The Ugandan government bought a tractor for the district at a cost of 78,000,000 and it was supposed to be in a time use for 7 years . Using double declining method , calculate how much wit like the machine be at the end of the seventh year of use .

  15. carlos December 18, 2018 at 12:12 am #

    Perdue Company purchased equipment on April 1 for $116,910. The equipment was expected to have a useful life of three years, or 8,100 operating hours, and a residual value of $3,510. The equipment was used for 1,500 hours during Year 1, 2,800 hours in Year 2, 2,400 hours in Year 3, and 1,400 hours in Year 4.

    Double-declining-balance method

    Year 1 Amount
    year 2
    year 3
    year 4

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