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<ManualTopic ID="/baanerp/tf/onlinemanual/000188" xml:lang="en">
   <Header>
      <Title>To calculate Declining Balance depreciation</Title>
      <Keyword type="header" order="d1e1958761">
         <Level1>Declining Balance (DB) Calculations</Level1>
      </Keyword>
      <Keyword type="header" order="d1e1958764">
         <Level1>DB Calculations</Level1>
      </Keyword>
      <Keyword type="header" order="d1e1958767">
         <Level1>Calculating</Level1>
         <Level2>Declining Balance (DB)</Level2>
      </Keyword>
   </Header>
   <GeneralSection>
      <Paragraph>In the Declining Balance method, ERP Enterprise calculates each
		year's total depreciation by applying a constant percentage to the asset's net
		book value. The declining balance methods allocate the largest portion of an
		asset's cost to the early years of its useful life. It does not depreciate the
		asset to its salvage value. You must do it manually.</Paragraph>
      <Note>
         <SectionTitle>Note</SectionTitle>
         <Paragraph>If the asset for which you are calculating depreciation
		  contains an averaging convention, ERP Enterprise adjusts the depreciation expense for the first halfyear, quarter,
		  or month calculation.</Paragraph>
      </Note>
   </GeneralSection>
   <GeneralSection>
      <SectionTitle>Double declining balance depreciation</SectionTitle>
      <Paragraph>The depreciation rate for double declining balance method =
		Straight line depreciation rate *200 percent</Paragraph>
      <ExampleSection>
         <SectionTitle>Example</SectionTitle>
         <Paragraph>On April 1, 2011, Company A purchased an equipment at the cost
		  of $140,000. This equipment is estimated to have 5 year useful life. At the end
		  of the 5th year, the salvage value (residual value) will be $20,000. Company A
		  recognizes depreciation to the nearest whole month. Calculate the depreciation
		  expenses for 2011, 2012 and 2013 using double declining balance depreciation
		  method.</Paragraph>
         <Paragraph>Asset Life = 5 years. Hence, the straight line depreciation
		  rate = 1/5 = 20% per year.</Paragraph>
         <Paragraph>Depreciation rate for double declining balance method = 20% *
		  200% = 20% * 2 = 40% per year.</Paragraph>
         <List>
            <ListIntro>The depreciation amounts for the asset are calculated as
			 follows:</ListIntro>
            <ListItemHead>Year 2011</ListItemHead>
            <ListItem>Depreciation = $1,40,000 * 40% * 9/12 = $42,000.</ListItem>
            <ListItemHead>Year 2012</ListItemHead>
            <ListItem>Depreciation = ($140,000 - $42,000) * 40% * 12/12 = $39,200
			 .</ListItem>
            <ListItemHead>Year 2013</ListItemHead>
            <ListItem>Depreciation = ($140,000 - $42,000 - $39,200) * 40% * 12/12 =
			 $23,520</ListItem>
            <ListItemHead>Year 2014</ListItemHead>
            <ListItem>Depreciation = ($140,000 - $42,000 - $39,200 - $23,520) * 40%
			 * 12/12 = $14,112</ListItem>
            <ListItemHead>Year 2015</ListItemHead>
            <ListItem>Depreciation = ($140,000 - $42,000 - $39,200 - $23,520 -
			 $14,112 ) * 40% * 12/12 = $8,467.</ListItem>
         </List>
      </ExampleSection>
      <Note>
         <SectionTitle>Note</SectionTitle>
         <Paragraph>The depreciation for the Year 2015 must be taken as $1,168 but
		  not $8,467, in order to maintain the book value same as the salvage
		  value.</Paragraph>
         <Paragraph>$21,168 - $20,000 = $1,168 (At this point, depreciation
		  stops.)</Paragraph>
      </Note>
      <TABLE border="1" borderstyle="default" space-and-orientation="indented-estimated">
         <TBODY noTR="6">
            <TR no="1" isLast="false">
               <TH rowspan="1" colspan="1">A-Year</TH>
               <TH rowspan="1" colspan="1">B- Book Value at the
				beginning</TH>
               <TH rowspan="1" colspan="1">C-Depreciation Rate</TH>
               <TH rowspan="1" colspan="1">D- Depreciation Amount
				(D=B*C*Number of months /12)</TH>
               <TH rowspan="1" colspan="1">E-Book Value at the year-end</TH>
            </TR>
            <TR no="2" isLast="false">
               <TD rowspan="1" colspan="1">2011</TD>
               <TD rowspan="1" colspan="1">$140,000</TD>
               <TD rowspan="1" colspan="1">40%</TD>
               <TD rowspan="1" colspan="1">$42,000</TD>
               <TD rowspan="1" colspan="1">$98,000</TD>
            </TR>
            <TR no="3" isLast="false">
               <TD rowspan="1" colspan="1">2012</TD>
               <TD rowspan="1" colspan="1">$98,000</TD>
               <TD rowspan="1" colspan="1">40%</TD>
               <TD rowspan="1" colspan="1">$39,200</TD>
               <TD rowspan="1" colspan="1">$58,800</TD>
            </TR>
            <TR no="4" isLast="false">
               <TD rowspan="1" colspan="1">2013</TD>
               <TD rowspan="1" colspan="1">$58,000</TD>
               <TD rowspan="1" colspan="1">40%</TD>
               <TD rowspan="1" colspan="1">$23,520</TD>
               <TD rowspan="1" colspan="1">$35,280</TD>
            </TR>
            <TR no="5" isLast="false">
               <TD rowspan="1" colspan="1">2014</TD>
               <TD rowspan="1" colspan="1">$35,280</TD>
               <TD rowspan="1" colspan="1">40%</TD>
               <TD rowspan="1" colspan="1">$14,112</TD>
               <TD rowspan="1" colspan="1">$21,168</TD>
            </TR>
            <TR no="6" isLast="true">
               <TD rowspan="1" colspan="1">2015</TD>
               <TD rowspan="1" colspan="1">$21,168</TD>
               <TD rowspan="1" colspan="1">40%</TD>
               <TD rowspan="1" colspan="1">$1,168</TD>
               <TD rowspan="1" colspan="1">$20,000</TD>
            </TR>
         </TBODY>
      </TABLE>
   </GeneralSection>
   <GeneralSection>
      <SectionTitle>150% declining balance depreciation</SectionTitle>
      <Paragraph>The depreciation rate for 150% declining balance method =
		Straight line depreciation rate *150 percent</Paragraph>
      <ExampleSection>
         <SectionTitle>Example</SectionTitle>
         <Paragraph>On April 1, 2011, Company A purchased an equipment at the cost
		  of $140,000. This equipment is estimated to have 5 year useful life. At the end
		  of the 5th year, the salvage value (residual value) will be $20,000. Company A
		  recognizes depreciation to the nearest whole month. Calculate the depreciation
		  expenses for 2011, 2012 and 2013 using 150 percent declining balance
		  depreciation method.</Paragraph>
         <Paragraph>Asset Life = 5 years. Hence, the straight line depreciation
		  rate = 1/5 = 20% per year.</Paragraph>
         <Paragraph>Depreciation rate for 150 percent declining balance method =
		  20% * 150% = 20% * 1.5 = 30% per year.</Paragraph>
         <List>
            <ListIntro>The depreciation amounts are calculated as
			 follows:</ListIntro>
            <ListItemHead>Year 2011</ListItemHead>
            <ListItem>Depreciation = $1,40,000 * 30% * 9/12 = $31,500.</ListItem>
            <ListItemHead>Year 2012</ListItemHead>
            <ListItem>Depreciation = ($140,000 - $31,500) * 30% * 12/12 = $32,550
			 .</ListItem>
            <ListItemHead>Year 2013</ListItemHead>
            <ListItem>Depreciation = ($140,000 - $31,500 - $32,550) * 30% * 12/12 =
			 $22,785</ListItem>
            <ListItemHead>Year 2014</ListItemHead>
            <ListItem>Depreciation = ($140,000 - $31,500 - $32,550 - $22,785) * 30%
			 * 12/12 = $15,950</ListItem>
            <ListItemHead>Year 2015</ListItemHead>
            <ListItem>Depreciation = ($140,000 - $31,500 - $32,550 - $22,785 -
			 $15,950 )*30% *12/12 = $11,165.</ListItem>
            <ListItemHead>Year 2016</ListItemHead>
            <ListItem>Depreciation = ($140,000 - $31,500 - $32,550 - $22,785 -
			 $15,950 -$11,165 )*30% *12/12 = $7,815.</ListItem>
         </List>
      </ExampleSection>
      <Note>
         <SectionTitle>Note</SectionTitle>
         <Paragraph>Depreciation for the Year 2016 must be taken as $6,051 but not
		  $7,815, in order to maintain the book value same as the salvage
		  value.</Paragraph>
         <Paragraph>$26,051 - $20,000 = $6,051 (At this point, depreciation
		  stops.)</Paragraph>
      </Note>
      <TABLE border="1" borderstyle="default" space-and-orientation="indented-estimated">
         <TBODY noTR="7">
            <TR no="1" isLast="false">
               <TH rowspan="1" colspan="1">A-Year</TH>
               <TH rowspan="1" colspan="1">B- Book Value at the
				beginning</TH>
               <TH rowspan="1" colspan="1">C-Depreciation Rate</TH>
               <TH rowspan="1" colspan="1">D- Depreciation Amount
				(D=B*C*Number of months /12)</TH>
               <TH rowspan="1" colspan="1">E-Book Value at the year-end</TH>
            </TR>
            <TR no="2" isLast="false">
               <TD rowspan="1" colspan="1">2011</TD>
               <TD rowspan="1" colspan="1">$140,000</TD>
               <TD rowspan="1" colspan="1">30%</TD>
               <TD rowspan="1" colspan="1">$31,500</TD>
               <TD rowspan="1" colspan="1">$108,500</TD>
            </TR>
            <TR no="3" isLast="false">
               <TD rowspan="1" colspan="1">2012</TD>
               <TD rowspan="1" colspan="1">$108,500</TD>
               <TD rowspan="1" colspan="1">30%</TD>
               <TD rowspan="1" colspan="1">$32,550</TD>
               <TD rowspan="1" colspan="1">$75,950</TD>
            </TR>
            <TR no="4" isLast="false">
               <TD rowspan="1" colspan="1">2013</TD>
               <TD rowspan="1" colspan="1">$75,950</TD>
               <TD rowspan="1" colspan="1">30%</TD>
               <TD rowspan="1" colspan="1">$22,785</TD>
               <TD rowspan="1" colspan="1">$53,165</TD>
            </TR>
            <TR no="5" isLast="false">
               <TD rowspan="1" colspan="1">2014</TD>
               <TD rowspan="1" colspan="1">$53,165</TD>
               <TD rowspan="1" colspan="1">30%</TD>
               <TD rowspan="1" colspan="1">$15,950</TD>
               <TD rowspan="1" colspan="1">$37,216</TD>
            </TR>
            <TR no="6" isLast="false">
               <TD rowspan="1" colspan="1">2015</TD>
               <TD rowspan="1" colspan="1">$37,216</TD>
               <TD rowspan="1" colspan="1">30%</TD>
               <TD rowspan="1" colspan="1">$11,165</TD>
               <TD rowspan="1" colspan="1">$26,051</TD>
            </TR>
            <TR no="7" isLast="true">
               <TD rowspan="1" colspan="1">2016</TD>
               <TD rowspan="1" colspan="1">$26,051</TD>
               <TD rowspan="1" colspan="1">30%</TD>
               <TD rowspan="1" colspan="1">$6,051</TD>
               <TD rowspan="1" colspan="1">$20,000</TD>
            </TR>
         </TBODY>
      </TABLE>
   </GeneralSection>
</ManualTopic>