Microsoft Office Tutorials and References

In Depth Information

**Depreciating the Finer Things in Life**

In cell F9 in Figure 6-2, the formula is =SYD($B$2,$B$3,$B$4,B9). Note

how the first three arguments are fixed to the cells B2, B3, and B4. With this

formula entered in cell F9, simply dragging the formula (using the fill handle

in the lower-right corner of the cell) down to F20 fills the range of cells that

need the calculation. The fourth argument changes in each row. For example,

cell F20 has this formula: =SYD($B$2,$B$3,$B$4,B20).

Creating an even faster accelerated

depreciation schedule

The Double Declining Balance method provides an accelerated depreciation

schedule but calculates the amounts differently than the Sum of Years’ Digits

method.

Although rooted in the doubling of the Straight Line method (which is not an

accelerated method), the calculation for each successive period is based on

the remaining value of the asset after each period instead of to the

depreciable cost. Because the remaining value is reduced each period, the schedule

for each period is different.

The DDB function takes five arguments. The first four are required:

✓
Cost

✓
Salvage

✓
Life (the number of periods)

✓
Period for which the depreciation is to be calculated

The fifth argument is the factor. A factor of 2 tells the function to use the

Double Declining Balance method. Other values can be used, such as 1.5. The

factor is the rate at which the balance declines. A smaller value (than the

default of 2) results in a longer time for the balance to decline. When the fifth

argument is omitted, the value of 2 is the default.

The DDB function returns a different depreciation amount for each period, so

the period must be entered as an argument. In Figure 6-2, each formula in the

range H9:H20 uses the DDB function but has a different period as the fourth

argument. For example, cell H9 has the formula =DDB($B$2,$B$3,$B$4,B9),

and cell H10 has the formula =DDB($B$2,$B$3,$B$4,B10). The last

argument provides a different value.