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How to calculate declining-balance depreciation

Declining balance depreciates a fixed percentage of what’s left each year. The factor goes in i: 200 for double-declining balance.

Problem

Equipment costs $50,000, has a salvage value of $5,000 and an 8-year life. What is the double-declining-balance depreciation in years 1 and 2?

Keystrokes

  1. fFINx≷y
    0.00

    Start clean.

  2. 50000PV
    50,000.00

    The cost.

  3. 5000FV
    5,000.00

    The salvage value.

  4. 8n
    8.00

    The life in years.

  5. 200i
    200.00

    The declining-balance factor, in percent.

  6. 1fDB%
    12,500.00

    Year 1.

  7. 2fDB%
    9,375.00

    Year 2.

Answer

Year 1 is $12,500.00 and year 2 is $9,375.00.

Why it works

At 200% over 8 years, each year takes 2 ÷ 8 = 25% of the book value at the start of the year. Year 1 is 25% of $50,000. Year 2 is 25% of what’s left.

Use 150i for 150% declining balance. The calculator stops depreciating at the salvage value.

Questions

Does it switch to straight line?

Not by itself. Many tax schedules switch when straight line gives more; compare the two each year.

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