PPE-Accelerated Depreciation Methods

Question 1

What are the calculation for the Sum of the Years’ Digits Method?

Answer 1

SYD = N(N+1)/2
Year 1 Depreciation: N/SYD(Cost - Salvage Value)
Year 2 Depreciation: ((N-1)/SYD)(Cost - Salvage Value)

Question 2

What are the calculations for the Declining Balance Method?

Answer 2

Year 1 Depreciation: Cost(2/N)
Year 2 Depreciation: (Cost - Yr 1 Dep)(2/N)
*alternatively use 1.5 depending on rate used

Question 3

What do you have to watch out for when using Declining Balance method?

Answer 3

-You don’t depreciate past salvage value