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Instructions for Declining-Balance Depreciation Schedule

Love Thy Pets Inc., Depreciation Schedule Declining Balance For 5 Year Asset $20,000 5,000 5 Years
C Accumulated depreciation at beginning of year D Book value at beginning of year (Cost Accumulated depreciation) E Depreciation Rate 1/Life X 2 F Annual Depreciation (Book value at beginning of year X Rate) G Accumulated depreciation at end of year H Book value at end of year (Cost Accumulated depreciation)

Cost of Asset Residual Value Useful Life


A End of year B Cost of Asset

1 2 3 4 5

$20,000 $20,000 $20,000 $20,000 $20,000

0 $ 8,000 $12,800 $15,000 $15,000

$20,000 $12,000 $ 7,200 $ 5,000 $ 5,000

40% 40% 40% 40% 40%

$8,000 $4,800 $2,200 0 0

$ 8,000 $12,800 $15,000 $15,000 $15,000

$12,000 $ 7,200 $ 5,000 $ 5,000 $ 5,000

Systematic Instructions Always start with the three-line header, which in this case includes the name of the corporation, the title of the form, and the assets useful life. 1. On the first line place the title Cost of Asset and then the dollar value of the asset. 2. On the second line place the title Residual Value and the dollar value of the asset at the end of its useful life to the corporation. 3. On the third line place the title Useful Life and the amount of years the asset will be of value to the corporation. Please take note that an asset does not cease to exist just because it is no longer useful to the corporation. 4. On the fourth line label the columns alphabetically. 5. On the fifth line use the following labels
Accumulated depreciation at beginning of year Book value at beginning of year (Cost Accumulated depreciation) Annual Depreciation (Book value at beginning of year X Rate) Book value at end of year (Cost Accumulated depreciation)

End of year

Cost of Asset

Depreciation Rate 1/Life X 2

Accumulated depreciation at end of year

MJC Revised 1/2012

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Instructions for Declining-Balance Depreciation Schedule


6. Column A list down the number of years in the assets projected useful life. 7. Column B list the original cost of the asset in each year of the assets useful life. 8. Column C the first year will be $0 because the asset has not been used but thereafter the value for this column will be taken from column G for the prior year. 9. Column D the first year the book value at the beginning of the year will be the original cost of the asset but thereafter book value will be taken from column H for the prior year. 10. Column E is the deprecation rate. The formula for the rate is 1 divided by the number of years in the useful life of the asset time two for double declining balance. Please note that some assets are depreciated at less than twice the straight line rate. One divided by the number of years in the useful life of an asset is called the straight line rate. The rate will be the same for every year of the assets useful life. 11. Column F value is arrived at by multiplying the dollar value in column D time the rate in column E. In years four and five of this asset the amount of annual depreciation yield by the formula will exceed the allowed total amount of depreciable cost so no depreciation can be taken in those years. In year three the formula will yield more annual depreciation than can be taken so only the dollar amount that brings the accumulated depreciation up to the maximum allowable depreciable cost can be allotted for that year. Subtract the residual value from the original cost to get the depreciable cost for an asset. 12. Column G is the sum total of all the annual depreciation taken up to the current period. Year one accumulated depreciation will be the same as the annual depreciation since no prior depreciation has been taken. Thereafter the current years depreciation will be added to the prior years accumulated depreciation to arrive at the current years accumulated depreciation. Note in years four and five that the accumulated depreciation does not change since it has reached the maximum allowable depreciable cost in year three. 13. Column H is arrived at by subtracting the value in column G accumulated depreciation from the value in column B which is the cost of the asset. Note that in year three that the residual value for the asset has been reach so no more depreciation can be taken since an asset cannot be depreciated below its residual value.

MJC Revised 1/2012

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