Since declining balance depreciation is sensitive to

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Unformatted text preview: hrough the “DDB” formula found in the financial category. The formula requires asset cost, asset salvage or residual value, life, period of life, and depreciation factor. Excel expects the number 2 or the percentage 200% to represent double-declining depreciation. Depreciation at 150% declining balance would be input as 1.5 or 150%. Excel will accept and work with any schedule entered in these formats. The “Declining Balance” worksheet in the “Depreciation” data file shows the formula in action with the same basic values as utilized for the straight-line depreciation above. The “Declining Balance” worksheet looks to the “Input” worksheet for values and factors. The “DDB” or double declining balance formula requires the cost of the asset, the salvage value, the life, the period depreciation is asked for, and the factor. Even though the title of this formula is “DDB” indicating double declining balance, it will accept any logical factor you input. In cell B12 the formula reads “=IF(A12="","",DDB($B$2,$B$4, $B$5,A12,$B$7)).” The “If” statement checks for available depreciation as explained in the “Straight-Line Depreciation” section. It then looks to cells B2 through B7 for cost, salvage value, and the declining factor. The factor will default to 2, (200%) if left blank. Since declining balance depreciation is sensitive to the period for valuation, the “A12” reference provides the period reference. Clue: Utilizing the DDB formula may require an adjustment at the end of the life of the asset to get the asset to fully depreciated amount of “0”. The table below shows double-declining depreciation by “Pencil and paper” without salvage value and no adjustment. If the adjustment is held until the last period of a 5-year life, the last year’s depreciation is actually $12,960 while the fourth year’s depreciation expense is only $8,640. This type of adjustment is not uncommon with accelerated deprecation schedules. Page 90 Solving Accounting Principles Problems Using Excel for Windows The “VDB”, or “Variable Declining Balance”, concept partially addresses this situation as it is capable of converting to straight...
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