Component |
Description |
Cost of Asset |
The initial cost of acquiring the asset. |
Salvage Value |
The estimated residual value of the asset at the end of its useful life. |
Useful Life |
The duration over which the asset is expected to be used. |
Depreciation Rate |
The rate at which the asset is depreciated, usually double the straight-line rate. |
Book Value |
The value of the asset at the beginning of the period. |
Depreciation Expense |
The depreciation expense for the period calculated using the double declining balance method. |
Formula |
Depreciation Expense = (Book Value at Beginning of Year) × (2 / Useful Life) |
Purpose |
Used to accelerate the depreciation expense for assets, reflecting higher depreciation charges in the early years of an asset’s life. |