Declining Balance Method Example

For depreciation rules 3, 4, and 5 (Declining Balance Methods) that have a Method of Computation of I or C, you might need to create a 999 life year rule to allow for depreciation calculations during the disposal year. Consider this example when creating a 999 life year rule for the depreciation rule:

Set up two new depreciation formulas as follows: (The second formula is optional and only needs to be set up if you are requiring a Lower Limit.)

1. Add a new depreciation formula by copying Formula 006 (provided in the demonstration data).

2. Enter this formula in the Formula field:

   ((((10-51) / 03) * 49) *11)* 56

3. Create an additional formula by copying Formula 701 provided in the demonstration data, if a Lower Limit is required for the disposal year depreciation calculation.

4. Enter this formula in the Formula field:

   ((01-51) / (03 - (07) + 49 + (12-50) * 49) * 49) * 56

5. Create an additional formula for salvage value formula and enter this formula in the Formula field:

   (53 * 49)

   Note: This salvage value formula should be used only with a 999 disposal rule that uses the lower limit.

6. Enter these values in the Depreciation Formula field as separate line items:

   • The new depreciation formula.

   • The new lower limit formula (if Lower Limit is required).

   • The new salvage formula (if you use the Lower Limit).

7. Use the same value in the Basis Formula field for all of the depreciation formulas.