Declining Balance Decreasing Method

In depreciation method, the decreasing amount of depreciation expense annually is derived from multiplication of depreciation rate by book value of the year beginning in the year in which it is charged.

The Formula of Declining Balance Decreasing Method

Information :
A = Cost of assets is the amount of costs incurred by the company to acquire an activation until the asset is ready to be operated.
S = Estimated residual value of the asset is the value of the appraisal that may be obtained through the assets that have passed its life.
r = Depreciation rate or percentage depreciation
n = Age of benefit / Age of economic assets in the year.
D = Depreciation expense for each period

Example Question of Declining Balance Decreasing Method

An asset at a cost of $ 20,000,000. After operating for 6 years is estimated the remaining value of $ 5,000,000. By using the declining balance method determine the rate of depreciation annually!

Answer:
A = $20,000,000
S = $5,000,000
n = 6 years

So the amount of depreciation each year is 20.63% of the book value.

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