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The DoubleDeclining Balance MethodTable of Contents:
As one of several "accelerated depreciation" methods, doubledeclining balance (DDB) results in relatively large amounts of depreciation in early years of asset life and smaller amounts in later years. This method can be justified if the quality of service produced by an asset declines over time, or if repair and maintenance costs will rise over time to offset the declining depreciation amount. With this method, a fixed percentage of the straightline rate (i.e., 200% or "double") is multiplied times the remaining book value of an asset (as of the beginning of a particular year) to determine depreciation for a particular year. As time passes, book value and annual depreciation decrease. To illustrate, let's again utilize our example of the $100,000 asset, with a fouryear life, and $10,000 salvage value. Depreciation for each of the four years would appear as follows:
The amounts in the above table deserve additional commentary. Year one is hopefully clear expense equals the cost times twice the straight line rate (4 year life = 25% straightline rate; 25% X 2 = 50% rate). Year two is the 50% rate applied to the remaining balance of the asset as of the beginning of the year; the remaining balance would be the cost minus the accumulated depreciation ($100,000  $50,000). Year three is just like year two  50% times the beginning book value Spreadsheet SoftwareDDB is also calculable from builtin depreciation functions. Below is the routine that returns the $12,500 annual depreciation value for Year 3. Fractional Period DepreciationUnder DDB, fractional years involve a very simple adaptation to the approach presented above. The first partial year will be a fraction of the annual amount, and all subsequent years will be the normal calculation (twice the straightline rate times the beginning of year book value). If our example asset were purchased on April 1, 20X1, the following calculations result:
Alternatives to DDB150% and 125% declining balance methods are quite similar to DDB, but the rate is 150% or 125% of the straightline rate (instead of 200% as with DDB). The SumoftheYears'Digits MethodThis approach was used in the graphic example at the beginning of this chapter, but without any calculation details. The calculations will undoubtedly be seen as a bit peculiar; I have no idea who first originated this approach or why. Under the technique, depreciation for any given year is determined by multiplying the depreciable base by a fraction; the numerator is a digit relating to the year of use (e.g., the digit for an asset with a tenyear life would be 10 for the first year of use, 9 for the second, and so on), and the denominator is the sumoftheyears' digits (e.g., 10 + 9 + 8 + . . . + 2 + 1 = 55). In our continuing illustration, the fouryear lived asset would be depreciated as follows (bear in mind that 4 + 3 + 2 + 1 = 10):

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