DECLINING

BALANCE
METHOD
DECLINING BALANCE METHOD
This method assumes that the annual cost of depreciation is
a fixed percentage of the book value at the beginning of the
year/end of the previous year.
DECLINING BALANCE METHOD
FORMULA:
EXAMPLE 1: DECLINING BALANCE
An equipment costing P250,000.00 has an estimated life of
15 years with a book value of P30,000.00 at the end of the
period. Compute the depreciation charge and its book value
after 10 years using declining balance method.
EXAMPLE 1: DECLINING BALANCE
EXAMPLE 2: DECLINING BALANCE
A machine costing P45,000 is estimated to have a salvage
value of P4,350 when retired at the end of 6 years. Depreciation
cost is computed using a constant percentage of the declining
book value. What is the annual rate of depreciation in %?
EXAMPLE 2: DECLINING BALANCE
EXAMPLE 3: DECLINING BALANCE
A machine having a first cost of P60,000 will be retired at the
end of 8 years. Depreciation cost is computed using a constant
percentage of the declining book value. What is the total cost of
depreciation, in pesos, up to the time the machine is retired if
the annual rate of depreciation is 28.72%?
EXAMPLE 3: DECLINING BALANCE
EXAMPLE 4: DECLINING BALANCE
A certain company makes it a policy that for any new piece
of equipment, the annual depreciation cost should not exceed
10 % of the original cost at any time with 10% scrap value.
Determine the length of service life necessary is method used is
declining balance.
EXAMPLE 4: DECLINING BALANCE