DB200 Depreciation
The equation for calculating 200% declining-balance depreciation is:
|
Acquisition Cost - Accumulated Depreciation Life in Years |
X 2 = |
Annual Depreciation |
The DB200 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 |
2 |
X |
9* 12 |
= |
$4,800 |
* 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 - 4,800 5 |
X |
2 |
= |
$4,480 |
Year 3:
|
16,000 - 9,280 5 |
X |
2 |
= |
$2,688 |
Year 4:
|
16,000 - 11,968 5 |
X |
2 |
= |
$1,612.80 |
Year 5:
In year 5, 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 3 years and 9 months, the remaining life is 1 year and 3 months, or 15 months.
|
16,000 - 1,000 - 13,580.80 15 |
X |
12 |
= |
$1135.36 |
Year 6:
|
16,000 - 1,000 - 14,716.16 3 |
X |
3 |
= |
$283.84 |
Note: When using the DB200 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. The net book value of the asset will equal the salvage value.