Think you Know Depreciation, think again!

You may know this but I didn't. I know what straight line depreciation is and my reading tells me that double decling is 2 x Straight line. BUT this is not so! (I have verified this from more than one source including Cornelius Fitchner).

Look below - Straight Line is $9,000 annually in this case and so I assumed that DDL would be $18,000 - but look below and notice the two columns compared. Read the definition closely.

Good Luck.

Straight-Line
(10% of begin-salvage every year)
Double-Declining
(20% of year\'s beginning book
value every year)
-- Depr Book Accum Depr Book Accum
1 9,000 91,000 9,000 20,000 80,000 20,000
2 9,000 82,000 18,000 16,000 64,000 36,000
3 9,000 73,000 27,000 12,800 51,200 48,800
4 9,000 64,000 36,000 10,240 40,960 59,040
5 9,000 55,000 45,000 8,192 32,768 67,232
6 9,000 46,000 54,000 6,554 26,214 73,786
7 9,000 37,000 63,000 5,243 20,972 79,028
8 9,000 28,000 72,000 4,194 16,777 83,223
9 9,000 19,000 81,000 3,355 13,422 86,578
10 9,000 10,000 90,000 3,422 10,000 90,000
Source: "Financial Accounting", John. J. Wild
Figure 2: Begin 100,000, Salvage 10,000



Read more: Depreciation: Straight-Line Vs. Double-Declining Methods http://www.investopedia.com/articles/06/depreciation.asp#ixzz3m46QmS3W 
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