Depreciate two fleet assets with the declining-balance method
DB depreciates whatever balance is left after the previous year, not the original cost — so the same rate produces a smaller figure every year, which is the whole point of "declining balance".
Task:
You handle fleet accounting for Ridgeview Landscaping. A new crew truck and a mower trailer have just gone into service, and the company depreciates its equipment for tax reporting using the fixed-declining balance method rather than straight-line. Work out each asset's depreciation for year 1 in column E and year 2 in column F.
Learning Objectives:
- Use DB to depreciate an asset under the fixed-declining balance method
- Recognize why declining-balance depreciation produces a smaller figure each year at a constant rate
- Read multiple periods from DB by changing only the period argument, for more than one asset
Solve without hints for +5 XP
Interactive Spreadsheet
The data in this exercise
This is the grid you start with. Cell references in the task — B6, C2 — point at the row numbers and column letters below.
| A | B | C | D | E | F | |
|---|---|---|---|---|---|---|
| 1 | Asset | Cost | Salvage | Life (Years) | Year 1 Depreciation | Year 2 Depreciation |
| 2 | Crew Truck | 32000 | 4000 | 8 | ||
| 3 | Mower Trailer | 9000 | 500 | 6 |
What this exercise teaches (contains the answer)
DB derives a single fixed rate from cost, salvage and life — about 22.9% for the truck — and then takes that rate not from the original cost but from whatever balance is left after the previous period's depreciation. That is why the truck's year-two figure (5,649.888) is smaller than year one's (7,328) despite an identical rate: 22.9% of the 24,672 left after year one is less than 22.9% of the full 32,000. A straight-line method would report the same number every year; a shrinking figure at a constant rate is the signature of declining-balance depreciation, and it is also why DB needs a period argument at all — the answer depends on which year's balance you're asking about.