Depreciation methods declining balance

Corrosion economics and corrosion management forms the theme of the fifth chapter. Discounted cash flow calculations, depreciation, the declining balance method, double declining method, modified accelerated cost recovery system and present worth calculation procedures are given, together with examples. In the second part, corrosion management, including the people factor in corrosion failure is briefly presented. Some of the expert systems presently available in the literature are briefly discussed. 

Other commonly used methods of computing depreciation are the declining-balance method (also known as the fixed-percentage... 

The declining-balance method of depreciation allows equipment or plant to be depreciated by a greater amount during the earlier years than during the later years. This method does not allow equipment or plant to be depreciated to a zero value at the end of the service life. 

A plant costs 6,000,000 and is expected to last 6 years. Its salvage value is negligible. Calculate the rate of depreciation using the double declining balance method. 

But earnings are not the only consideration. In 1968 the Union Carbide Corporation, along with many other companies, had a very bad year financially. In order to make its financial picture look better it switched from the double declining balance method of depreciation to the straight-line method. This reduced expenses (deprecitation being considered an expense) and hence increased profits. This is a semipermanent move, however, since a return to the double declining balance method would require approval of the Internal Revenue Service. 

Problem 2. Why is the salvage value not considered when depreciation for the double declining balance method is calculated ... 

It has a salvage value of 2000,000 and a net salvage value of 1,200,000. Assume the plant will last 7 years. Use (a) straight-line depreciation (b) double declining balance method (c) sum of the years-digits method... 

When the double declining method is considered, = 2/N, the annual depreciation is twice that of straight-line depreciation and the amount depreciated decreases with increase in the value of n. In the case of double declining balance depreciation method, the book value P—HDn in the nth year is given by4 ... 

Comparison of straight-line, multiple straight-line, sum-of-the-years-digits, and declining-balance methods for determining depreciation. 

When the declining-balance method is used, the annual depreciation cost is a fixed percentage of the property value at the beginning of the particular year. The fixed-percentage (or declining-balance) factor remains constant throughout the entire service life of the property, while the annual cost for depreciation is different each year. Under these conditions, the depreciation cost for the first year of the property s life is Ff, where f represents the fixed-percentage factor. At the end of the first year... 

Types of declining-balance methods for determining depreciation. 

The main advantage of the declining-balance and the combination methods is that they permit greater depreciation allowances in the early life of the... 

Comparison of the various depreciation methods shows that the declining-balance and the sum-of-the-years-digits methods give similar results. In both cases, the depreciation costs are greater in the early-life years of the property than in the later years. Annual depreciation costs are constant when the straight-line, sinking-fund, or present-worth method is used. Because interest effects are included in the sinking-fund and present-worth methods, the annual decrease in asset value with these two methods is lower in the early-life years than in the... 

A property has an initial value of 50,000, service life of 20 years, and final salvage value of 4000. It has been proposed to depreciate the property by the text-book declining-balance method. Would this method be acceptable for income-tax purposes if the income-tax laws do not permit annual depreciation rates greater than twice the minimum annual rate with the straight-line method ... 

One example of a cost that can vary during the life of a project is depreciation cost. If straight-line depreciation is used, this cost will remain constant however, it may be advantageous to employ a declining-balance or sum-of-the-years-digits method to determine depreciation costs, which will immediately result in variations in costs and profits from one year to another. Other predictable factors, such as increasing maintenance costs or changing sales volume, may also make it necessary to estimate year-by-year profits with... 

ItBased on the 1954 tax revision for depreciation accounting, any method could be used if the depreciation for the first two-thirds of the usefid life of the properly did not exceed the total of such allowances if they had been computed by the double declining-balance method. 

Debits in bookkeeping, 143-144 Declining-balance method for determining depreciation, 280-282 Deferred annuity, 230 Definitive estimate, 162 Deflation (see Inflation)... 

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