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Depreciation method 4:
The DDB (double declining balance) function is easy again. However, sometimes you don't reach the salvage value when you use this function.
The DDB function performs the following calculations. A useful life of 10 years results in a rate of 1/10 = 0.1. Because this function is called Double Declining Balance we double this rate (factor = 2). Depreciation value period 1 = 10,000 * 0.2 = 2,000.00. Deprecation value period 2 = (10,000 - 2,000.00) * 0.2 = 1...600.00, etc. As said earlier, sometimes you don't reach the salvage value when you use this function. In this example, if we subtract the depreciation values, the asset depreciates from 10,000 to 1073.74 in 10 years (see first picture, bottom half). However, read on to fix this.