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In Example 4, the salvage value is $25,000. From a practical standpoint, salvage value is often considered to be $0, because its valuation is often small and immaterial. For instance, after 5 years, a certain computer is considered obsolete. So, the computer has a salvage value of $0.
Spreadsheet for Example 4.
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Using the spreadsheet from Example 4, you can see that the value expensed during the first 4 years using double declining-balance depreciation was
For straight-line depreciation, the annual depreciation would be
After 4 years, the total depreciation expense is The spreadsheet below confirms that the total depreciation during the first 4 years is
So, using double declining-balance depreciation, we expensed more during the first 4 years than we would have with straight-line depreciation.
You can check your work using a depreciation schedule calculator located in Tools.
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You can depreciate most types of tangible property (except land), such as buildings, machinery, vehicles, furniture, and equipment. You also can depreciate certain intangible property, such as patents, copyrights, and computer software. To be depreciated, the property must meet all the following requirements.
* It must be property you own.
* It must be used in your business or income-producing activity.
* It must have a determinable useful life.
* It must be expected to last more than one year.