Microsoft Office Tutorials and References

In Depth Information

**Syntax**

Syntax

SLN(cost,salvage,life)

The SLN function returns the straight-line depreciation of an asset for one

period. This function takes the following arguments:

•
cost

cost
—
This is the initial cost of the asset.

•
salvage

salvage
—
This is the asset
’
s value at the end of the depreciation

period. Sometimes this is called the salvage valueof the asset.

•
life

life
—
This is the number of periods over which the asset is being de-

preciated. Sometimes this is called the useful lifeof the asset.

Using

Using
DDB
to Calculate Declining-Balance Depreciation

to Calculate Declining-Balance Depreciation

In the declining-balance method, depreciation happens at a constant rate. The

advantage of this method is that more depreciation happens in the earlier

years, providing a better tax benefit in early years.

Note

See Excel Help for this function for details on special handling of

Year 1 and the last year, as well as the algebra behind the rate for-

mula.

Let
’
s look at a simple example. Suppose that a $100,000 asset is depreciated

20% in Year 1. This results in a $20,000 depreciation expense. After Year 1,

the asset would have a value of $80,000 on the books. In Year 2, the remain-

ing balance of $80,000 is multiplied by the same 20% rate to yield a depreci-

ation of $16,000. The depreciation in Year 3 is 20% of the remaining $64,000, or

$12,800.

The trick to this method is figuring out the correct percentage to use for each

year. This involves fractional exponents and a little algebra. If you use

the DB function, however, you do not have to worry about any of that. Ex-

cel calculates this rate, rounded to three decimal places, as the first step

in the process. This rounding to three decimal places causes the calculation

to be off by a few dollars at the end of the useful life.

Syntax

DB(cost,salvage,life,period,month)