00:01
We're trying to find depreciation expense for an asset that costs 98 ,750, has a five -year life, and a salvage value of 5 ,900.
00:13
So let's make a chart.
00:15
We are going to have our chart say years.
00:20
We're going to have beginning balance, our rate, depreciation expense, and ending balance.
00:46
And so just to note, so when you do straight line depreciation, you just divide your cost by the year, the life, so the number of years.
01:03
But when you do declining balance, you're going to double this.
01:10
So ultimately, you're going to multiply it by two.
01:14
In other words regular straight line depreciation in this example if it's a five -year life asset then you're depreciating 20 % each year but for double declining you're going to depreciate 40 % of the book value each year so under the so i'm going to list the years and then i'm going to write 40 % for each of them so it might be even not to see that 40 % each time, but it's a bit of a reminder too to make sure you're using the right percentage.
02:02
So again, i also got this number if you think you have to divide it by five to get that 20 % if you were doing straight line, and then you multiply by two, and that's how you get 0 .4.
02:15
Okay, so let's start with our cost.
02:18
Our cost was 98 ,750.
02:22
That's the beginning balance, right, when we bought the asset.
02:25
When we multiply that by 40%, our depreciation expense for year one is 39 ,500.
02:32
To get the ending balance, we take the beginning balance and subtract the depreciation expense to get 59 -250.
02:42
And that ending balance is also the starting balance of the next year.
02:48
And we do the same thing...