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→Example: add declining balance method
The units can either be units of consumption (such as miles on an automobile) or units of production.
The units can either be units of consumption (such as miles on an automobile) or units of production.
===Declining Balance Depreciation===
Under the declining balance method, the straight-line amount per year is expressed as a percentage of the total amount to be depreciated, then the percentage is increased by a certain amount. The most common is '''double-declining-balance''' (sometimes called "200% declining balance"), where the depreciation in the first year is double what it normally would be. However, "150% declining balance" is also used in some cases.
Under this method, the same '''''percentage''''' is applied each year to the historical cost '''''without taking residual value into account'''''. However, in the final year, the depreciation amount does take residual value into account, so the depreciation charge for that year is much smaller.
In the example above, the depreciation of $9,000/year is 20% of the total; using double-declining-balance, the percentage to be taken is 40% of the historical cost until, in Year 5, the residual value is reached.
{| class="wikitable"
|-
! Year !! Value at Year Beginning !! Depreciation !! Value at Year End
|-
| 1 || $50,000 || $20,000<ref>$50,000 x 40% = $20,000</ref> || $30,000
|-
| 2 || $30,000 || $12,000<ref>$30,000 x 40% = $12,000</ref> || $18,000
|-
| 3 || $18,000 || $7,200<ref>$18,000 x 40% = $7,200</ref> || $10,800
|-
| 4 || $10,800 || $4,320<ref>$10,800 x 40% = $4,320</ref> || $6,480
|-
| 5 || $6,480|| $1,480<ref>$6,480 - $5,000 residual value = $1,480</ref> || $5,000
|}
==U.S. Tax Code==
==U.S. Tax Code==