I think it's because you already subtract the salvage value in the Straight-Line method before using the double declining method. So basically, you find the Straight-line method to find the depreciation value, and then you double the depreciation rate only making it from like 10% to 20%, and subtracting the salvage value again just wouldn't make any sense.
You are supposed to stop depreciating after reaching the salvage value of 20,000 as the ending inventory. So, you will have to find the depreciation expense value that will get you to an ending inventory of 20,000. To do so, you subtract 21,600 from 20,000, and you will get 1600 as depreciation expense that will make the ending inventory reach 20,000 (salvage value), and then you stop depreciating for the next period because you have already reached the salvage value.
I love seeing how creative the bookkeeping can get with depreciation.
I hate accounting. Thanks for explaining
Thank you I’m going to have test on ppe real soon this is perfect time
nice demo. I love illustrations. Question: what if you take the asset out of business at year 4?
Do Autos used for business have a zero salvage value?
Ie are they DB 200 down to zero in year five?
Thanks
Nice video, thanks 😊
Welcome 😊
Can you please explain why salvage value is not subtracted while calculating yearly depreciation for double declining method
I think it's because you already subtract the salvage value in the Straight-Line method before using the double declining method. So basically, you find the Straight-line method to find the depreciation value, and then you double the depreciation rate only making it from like 10% to 20%, and subtracting the salvage value again just wouldn't make any sense.
CLEAR! THANKS!
How did you come up with 1600 for year 4? thanks
You are supposed to stop depreciating after reaching the salvage value of 20,000 as the ending inventory.
So, you will have to find the depreciation expense value that will get you to an ending inventory of 20,000.
To do so, you subtract 21,600 from 20,000, and you will get 1600 as depreciation expense that will make the ending inventory reach 20,000 (salvage value), and then you stop depreciating for the next period because you have already reached the salvage value.
Thanks
I hope the salvage value has to be deducted in the beginning.