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Step 1
Review the calculation. The double declining balance methodology for depreciation multiples the depreciable base (book value) of the asset by an acceleration factor. The book value of an asset is the cost of the asset minus any accumulated depreciation to date.
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Step 2
Determine the depreciation factor. For our example, let's assume we bought a truck that cost $50,000. We want to depreciate the cost of the asset over a 5-year period. This equates to 20 percent every year if we use a straight-line depreciation method (expense the same amount every year). The factor you choose to accelerate the depreciation is your choice. Let's use 200 percent for this example; that is, we are going to accelerate depreciation of the truck by a factor of 40 percent (200% * 20%).
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Step 3
Calculate double declining depreciation in year 1. The depreciable base is $50,000. The depreciation expense is $20,000 ($50,000 * 0.4). Accumulated depreciation is $20,000.
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Step 4
Calculate double declining depreciation in year 2. The new depreciable base is $30,000 ($50,000 - $20,000). The depreciation expense is $12,000 ($30,000 * 0.4). Accumulated depreciation is $32,000 ($20,000 + $12,000).
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Step 5
Calculate double declining depreciation in year 3. The new depreciable base is $18,000 ($50,000 - $32,000). The depreciation expense is $7,200 ($18,000 * 0.4). Accumulated depreciation is $39,200 ($20,000 + $12,000 + $7,200).
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Step 6
Calculate double declining depreciation in year 4. The new depreciable base is $10,800 ($50,000 - $39,200). The depreciation expense is $4,320 ($10,800 * 0.4). Accumulated depreciation is $43,520 ($20,000 + $12,000 + $7,200 + $4,320).
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Step 7
Calculate double declining depreciation in year 5, the final year. The new depreciable base is $6,480 ($50,000 - $43,520). The depreciation expense is $2,592 ($6,480 * 0.4). Accumulated depreciation is $46,112 ($20,000 + $12,000 + $7,200 + $4,320 + $2,592).
