How to Calculate Double-Declining Depreciation Using Microsoft Excel

Video Transcript

"Hi my name is Dave Andrews and today I'm going to show you how to calculate double declining depreciation using Microsoft Excel. Let's open up Excel. Now double declining depreciation is the method of determining the value of an asset after depreciation so we are going to type in some information about our asset. First it is going to be the purchase value which is how much you spent to purchase that asset. The second is going to be the salvage value which is the absolute minimum that that asset could be sold should something ever happen to it. Now the next value that we are going to calculate is the life time of that asset or how long we expect for it to live and we will type in lifetime right here. Let's say we purchased an item for $10,000 and the very absolute minimum that that item could be sold for possibly at the end of its lifetime would be let's say $300 and we expect this object to last for three years so what we are going to do here is determine the double declining value of that asset over its three years. Now we are going to have year one, year two, and year three. Basically the way you determine the double declining value is you run a formula that takes the current value of that object in that year and multiply that by two which is the double, divided by the total lifetime of the object so if we have a value of let's say the first year it is worth $10,000 because we just purchased it so let's type in our first formula and type in an equals sign to begin our formula, let's say the current value of the object which is $10,000 and we are going to multiply that which is a little asterisk in Excel, two divided by the lifetime which is three years and just press enter. Now you get to your answer here and as you can see this is the new value of the object so if we do 10,000 minus that value or rather I need to do an equals 10,000 minus that value it has declined by almost a third $3,333 which is what we kind of expected over a lifetime of three years. Now let's calculate the third year which is the final year of its lifetime using that new value we calculated for the current value times two divided by three which is the lifetime and this is the value of that object after three years. It's that easy to calculate double declining depreciation. My name is Dave Andrews and I just explained to you how to calculate double declining depreciation in Microsoft Excel."