DD200 Depreciation
The DD200 depreciation method uses the declining-balance depreciation method and the modified half-year averaging convention. It switches to straight-line depreciation when this results in a greater amount of depreciation.
The equation for calculating DD200 depreciation is:
|
Acquisition Cost - Accumulated Depr.
|
X |
2 |
= |
Annual Depr. |
Here is an example:
|
Acquisition Value: |
$16,000 |
|
Useful Life: |
5 years |
|
Salvage Value: |
$1,000 |
|
Placed-in-Service Date: |
03/31/2021 |
Year 1:
|
16,000 5 |
X |
2 |
X |
100% * |
= |
$6,400 |
* According to the modified half-year convention, assets placed in service during the first half of the year are treated as if they were placed in service on the first day of the year. Therefore, the asset receives a full year's depreciation in the placed-in-service year.
Year 2:
|
16,000 - 6,400 5 |
X |
2 |
= |
$3,840 |
Year 3:
|
16,000 - 10,240 5 |
X |
2 |
= |
$2,304 |
Year 4:
|
16,000 - 12,544 5 |
X |
2 |
= |
$1,382.40 |
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. |
|
16,000 - 1,000 - 13,926.40 12 months |
X |
12 months |
= |
$1073.60 |
Note: When using the DD200 depreciation method, you do not depreciate the asset below its salvage value. After 5 years of depreciation, the asset's accumulated depreciation is $15,000. The net book value of the asset will equal the salvage value.