Instructions for Declining-Balance Depreciation Schedule

MJC Revised 1/2012 Page 1

Love Thy Pets Inc.,

Depreciation Schedule – Declining Balance

For 5 Year Asset

Cost of Asset $20,000

Residual Value 5,000

Useful Life 5 Years A B C D E F G H

End

of

year

Cost of

Asset

Accumulated

depreciation

at beginning

of year

Book value at

beginning of

year (Cost –

Accumulated

depreciation)

Depreciation

Rate

1/Life X 2

Annual

Depreciation

(Book value at

beginning of

year X Rate)

Accumulated

depreciation

at end of year

Book value at

end of year (Cost

– Accumulated

depreciation)

1 $20,000 0 $20,000 40% $8,000 $ 8,000 $12,000

2 $20,000 $ 8,000 $12,000 40% $4,800 $12,800 $ 7,200

3 $20,000 $12,800 $ 7,200 40% $2,200 $15,000 $ 5,000

4 $20,000 $15,000 $ 5,000 40% 0 $15,000 $ 5,000

5 $20,000 $15,000 $ 5,000 40% 0 $15,000 $ 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

End

of

year

Cost of

Asset

Accumulated

depreciation

at beginning

of year

Book value at

beginning of

year (Cost –

Accumulated

depreciation)

Depreciation

Rate

1/Life X 2

Annual

Depreciation

(Book value at

beginning of

year X Rate)

Accumulated

depreciation at

end of year

Book value at

end of year (Cost

– Accumulated

depreciation)

Instructions for Declining-Balance Depreciation Schedule

MJC Revised 1/2012 Page 2

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 year’s depreciation will be added to the

prior year’s accumulated depreciation to arrive at the current year’s 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.