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Accounting for Beginners #63 / Double Declining Balance Depreciation / With Residual Value - YouTube
Channel: CPA Strength
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yo yo yo what is going on everybody this
is CPA strength I am the strongest
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licensed CJ in the state of Florida Oh
weight lifting been lifting for a bit
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just like I've been doing this for a
minute I happen to have the best
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accounting playlist in the world because
that's what I do I teach the world
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accounting through building blocks this
up here happens to be part of the best
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playlist in the world just hit like a
genie but all your dreams come true you
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know what it is baby I'm in the middle
of the day I got people coming by my
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office going this kids crazy what's
going on we're going to get this kid out
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of this office man what's happening but
I tell you what think of me I'm not
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doing nothing but teaching the world
accounting okay I'm not even cursed
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anymore so get on with your little bad
self and get on with your little life
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because this is Friday now you go party
because I'm partying for me right now
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okay we're done as good as go boom this
is number 63 of my classic series this
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is a classic this is double declining
balance depreciation alright we've done
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we just did we just talked about
accumulated depreciation we just talked
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about depreciation in general what it is
how you tractor it we just did single
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line depreciation now this is double
declining balance depreciation it's also
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called an accelerated depreciation
method now we're going to I'm going to
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do a summary of this and that before but
how do you do double declining balance
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what is it all about just like
everything else that in accounting let's
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pick apart
let's pick apart the name the title and
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let's go back to straight-line
depreciation method for one second the
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way I like to remember straight-line
okay the name says straight line it's
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going to be the same depreciation every
month all right so it's going to be a
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straight line thousand dollars one year
thousand dollars next year the next year
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thousand dollars so it's a straight line
of a thousand dollars that straight line
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okay
I'm sorry you're going to remember Lex
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it's a straight line the same every year
this is double declining balance double
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it's going to be double the percent of
straight line all right so when you see
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double declining you're like double
double double of the straight line all
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right
great and it also has balance in the
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name of it so it's very key because you
multiply by the book value balance
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that's what you did you multiply by the
book value the balance the balance of
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the book value so it's in the title what
are our factors now we have the same
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factors here at first the ads in the
straight line we bought a truck for
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$5,000
our useful life is five years those are
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the same factors in straight line but
now on this one and double declining
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balance we have a residual value of $500
the whole thing is straight line is the
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same depreciation every year for the
five years all right
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and double declining balance is you take
more depreciation in the beginning and
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then at the end at each each year you
take less and less and less because
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there's a declining balance in whatever
$5,000 five years we're getting our
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percent our percentage so five years
five years that's good so so every a per
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year be 20% per year 20 40 60 80 100
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that's how you get your percents how
else could you get a percentage of front
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of your spa Jerusalem one divided by
five point two it's also how you can do
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it but anyway so figure out straight
lines twenty straight line would be 20
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percent because you go for five years
so you're in ten twenty twenty percent
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every year you take 20 percent of your
cost every year
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that would be $1,000 for straight line
all right now you multiply your straight
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line your number one by two but you
double it up let's then look that's in
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the name doubles all right so you get
your straight line percent now just like
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the name says you double it so that's
going to be the same forty percent every
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year forty percent every year unless
until it goes under the residual value
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because you don't want to depreciate it
more than it torts at the end step
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number three you take the percentage
that you got and you multiply it by the
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book value and that's how you get your
double declining balance now let's go
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so really what we figured out here is
forty percent annual the double define
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annual depreciation relevance how much
that's how much is now just go with our
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facts here and we have residual value of
five hundred in this example to start
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off with body for five thousand dollars
there's your cost now the cost isn't
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going to change you that is the cost
five thousand dollars that's the whole
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way through something else I did notice
doing this chart the accumulated
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depreciation and the book value begins
the year equals the cost so that makes
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sense to everybody I hope because I just
hope that makes sense and some what I
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saw with doing these charts first year
out you got for you but you cost five
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thousand dollars we're done with the
cost that's all I'm going to change
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cumulative pre-shading zero because you
haven't depreciated anything yet book
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value beginning of the years five
thousand dollars you multiply that by
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forty percent this is the double
declining balance five thousand times
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forty percent is two thousand sortation
two thousand dollars depreciations first
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year
you see in straight-line it was a
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thousand each year a thousand thousand
thousand thousand
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so you're going to see you're taking
double out the first year I just want
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you to know that notice that both values
3000 at the end of the year start of the
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second year you have you have that
$2,000 community depreciation both value
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of $3,000 because that was the booklet
end of the year so that's the book value
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the beginning of you now we're going to
multiply that by 40% most has a book
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died of double declining volumes and now
the depreciation for the second year is
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1200 that's more than straight lines so
you're taking depreciation in the early
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stages of the assets useful life and
because it's an accelerated depreciation
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method leaving us with a book value
$1,800 the end of the year year three we
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have $3,200 of accumulated depreciation
now book value $1,800 multiply that by
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40% double declining balance that is 720
dollars of depreciation for the third
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year now compared to straight line at
1000 this is less no now we're taking
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less depreciation you varic took more
left enough quite later right yeah slow
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it down leaves us with a Book value of
$1,000 q a differentiation of 3914 year
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for Book value of a thousand eighty once
without by 40% depreciation for the
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fourth year four hundred and four
hundred and thirty-two dollars now it's
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really not that much and we have end of
the year Book value of six hundred and
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forty eight dollars that's our book
value the rest of the 5,000 is
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accumulated depreciation 4352
so we only have it's only worth on our
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book $648 now on our fifth year we're
taking 40% of that but hold on a second
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I thought my calculator bra where'd I
put my calculator bro if you took six
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hundred to six hundred and forty eight
times forty percent here six hundred and
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forty eight times point four
that's like $259 so if you have if you
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put that that would leave us with less
than $500 residual value which we don't
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want to do because that's how much it's
going to be worth when we're done with
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the asset so this last year
we're just cars we're just going to have
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as much depreciation allows to have our
asset end with five hundred dollars so
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that one hundred and forty eight dollars
so you can see how that's a little
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different than straight line straight
line over a thousand dollars each year
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but in this example we took an
accelerated method so we took a lot more
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double than sprinkling this year one of
the more than straight-line less than
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straight-line a lot less than
straight-line a really really really a
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lot less than straight-line you know
what this went long enough and this was
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this is going to be double declining
balance with residual value on the neck
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next video I'm going to do is double
declining balance without the residual
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value let's check out a little minute to
talk what am I going to say I don't know
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let's focus on bettering ourselves let's
talk about let's think about let's think
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about not you know let's see if I'm not
not talking about other people's you
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know what what good does that do you
know talking trash about people just
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let's just try to try to uplift other
people let's try to do better right
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let's try to stay positive let let's
watch my next accounting video do that
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let's like share subscribe all that good
stuff and I'll see you next time juice
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