DB150 Depreciation
The equation for calculating 150% declining-balance depreciation is:
|
Acquisition Cost - Accumulated Depr. Life in Years |
X |
1.5 |
= |
Annual Depreciation |
The DB150 depreciation method uses the midmonth averaging convention, and it switches to the straight-line depreciation method when this results in a greater amount of depreciation.
Here is an example:
|
Acquisition Value: |
$16,000 |
|
Useful Life: |
5 years |
|
Salvage Value |
$1,000 |
|
Placed-in-Service: |
03/31/2021 |
Year 1:
|
16,000 5 |
X |
1.5 |
X |
9 * 12 |
= |
$3,600 |
* Under the midmonth averaging convention, the asset receives no depreciation in March because it was placed in service after the 16th of the month. Therefore, the asset receives 9 months of depreciation (April through December).
Year 2:
|
16,000 - 3,600 5 |
X |
1.5 |
= |
$3,720 |
Year 3:
|
16,000 - 7,320 5 |
X |
1.5 |
= |
$2,604 |
Year 4:
In year 4, the calculation switches to straight-line depreciation, using the following formula:
|
Acquisition Cost - Salv. Val. - Accumulated Depr. Remaining Life |
X |
No. of months |
= |
Annual Depr. |
Because you have depreciated the asset for 2 years and 9 months, the remaining life is 2 year and 3 months, or 27 months.
|
16,000 - 1,000 - 9,924 27 |
X |
12 |
= |
$2,256 |
Year 5:
|
16,000 - 1,000 - 12,180 15 |
X |
12 |
= |
$2,256 |
Year 6:
|
16,000 - 1,000 - 14,436 3 |
X |
3 |
= |
$564 |
Note: When using the DB150 depreciation method, you do not depreciate the asset below its salvage value. After 6 years of depreciation, the asset's accumulated depreciation is $15,000. You never completely depreciate the asset.