Accelerated Depreciation Method: Double-Declining-Balance

Double-declining-balance (DDB) method allows depreciation to be recorded at twice the rate of depreciation under straight-line method.

Where:

• Accumulated depreciation = the summation of all depreciation already recorded from the use of the asset

• n = useful life in years

12. Calculating Depreciation Expense Using the DDB Method

Exercise Q1: Using the previous example from Exercise 11 ($100,000 equipment with an expected life of five years and a salvage value of $20,000), complete the depreciation schedule for each of the years using the DDB depreciation method.

12. Calculating Depreciation Expense Using the DDB Method

Solution 1: Year Beginning Book Value Depreciable Rate (DDB) Depreciation (Rate × Book Value) Ending Book Value 0 $100,000 - $0 $100,000 1 100,000 2/5 40,000 60,000 2 60,000 2/5 24,000 36,000 3 36,000 2/5 14,400 21,600 4 21,600   800 20,800 5 20.800   800 20,000 Note that in this example, the DDB method was abandoned after year 3 since depreciation cannot decrease the book value of an asset below its salvage value. At this point, a company would be allowed to switch to the straight-line depreciation method, and to depreciate the remaining $1,600 ($21,600 – $20,000) of an asset’s depreciable cost over its remaining life (in this case, two years).