The image above represents book value. To calculate book value using the declining balance method, three essential parameters are needed and these parameters are Present Amount or Worth (P), Rate of Depreciation (α) and Number of Years of the Asset (t).
The formula for calculating book value:
B = P(1 – α)t
Where:
B = Book value of an asset
P = Present worth or amount
α = rate of depreciation
t = Number of years of the asset
Let’s solve an example;
Find the book value when the present amount or worth is 8, the rate of depreciation is 18 and the number of years of the asset is 10.
This implies that;
P = Present worth or amount = 8
α = rate of depreciation = 18
t = Number of years of the asset = 10
B = P(1 – α)t
So, B = 8(1 – 18)10
B = 8(-17)10
Then, B = 8 x 201
B = 1612
Therefore, the book value is ₦1612.
Calculating the Present Amount or Worth when the Book Value, the Rate of Depreciation and the Number of Years of the Asset are Given
P = B / (1 – α)t
Where;
P = Present worth or amount
B = Book value of an asset
α = rate of depreciation
t = Number of years of the asset
Let’s solve an example;
Find the present amount or worth when the book value is 32, the rate of depreciation is 16 and the number of years of the asset is 10.
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This implies that;
B = Book value of an asset = 32
α = rate of depreciation = 16
t = Number of years of the asset = 10
P = B / (1 – α)t
P = 32 / (1 – 16)10
That is, P = 32 / (- 15)10
P = 32 / 5766
P = 0.00554
Therefore, the present amount or worth is 0.00554.
Read more:Â How to Calculate and Solve for Book Value | Straight line Method | Depreciation.
Calculating the Number of Years of the Asset when the Book Value, the Rate of Depreciation and the Present Amount or Worth are Given
t = In (B / P) / In (1 – α)
Where;
t = Number of years of the asset
P = Present worth or amount
B = Book value of an asset
α = rate of depreciation
Let’s solve an example;
Find the number of years of the asset when the book value is 22, the present worth or amount is 2 and the rate of depreciation is 6.
This implies that;
P = Present worth or amount = 2
B = Book value of an asset = 22
α = rate of depreciation = 6
t = In (B / P) / In (1 – α)
t = In (22 / 2) / In (1 – 6)
So, t = In (11) / In (- 5)
t = 2.39 / – 1.609
t = – 1.485
Therefore, the number of years of the asset is – 1.485.
Calculating the Rate of Depreciation when the Book Value, the Present Amount or Worth and the Number of Years of the Asset are Given
α = 1 – e In (B / P) / t
Where;
α = rate of depreciation
B = Book value of an asset
P = Present worth or amount
t = Number of years of the asset
Let’s solve an example;
Find the rate of depreciation when the book value is 35, the present amount or worth is 7 and the number of years of the asset is 10.
This implies that;
B = Book value of an asset = 35
P = Present worth or amount = 7
t = Number of years of the asset = 10
α = 1 – e In (B / P) / t
That is, α = 1 – e In (35 / 7) / 10
α = 1 – e In (5) / 10
α = 1 – e 1.609 / 10
Then, α = 1 – e 0.1609
α = 1 – 0
Therefore, the rate of depreciation is 0.
How to Calculate Book Value | Declining Balance Method Using Nickzom Calculator
Nickzom Calculator – The Calculator Encyclopedia is capable of calculating the book value.
To get the answer and workings of the book value using the Nickzom Calculator – The Calculator Encyclopedia. First, you need to obtain the app.
You can get this app via any of these means:
Web – https://www.nickzom.org/calculator-plus
To get access to the professional version via web, you need to register and subscribe for NGN 1,500 per annum to have utter access to all functionalities.
You can also try the demo version via https://www.nickzom.org/calculator
Android (Paid) – https://play.google.com/store/apps/details?id=org.nickzom.nickzomcalculator
Android (Free) – https://play.google.com/store/apps/details?id=com.nickzom.nickzomcalculator
Apple (Paid) – https://itunes.apple.com/us/app/nickzom-calculator/id1331162702?mt=8
Once, you have obtained the calculator encyclopedia app, proceed to the Calculator Map, then click on Economics under Engineering.
Now, Click on Depreciation under Economics
Now, Click on Book Value under Depreciation
The screenshot below displays the page or activity to enter your values, to get the answer for the book value according to the respective parameters which are the Present Amount or Worth (P), Rate of Depreciation (α) and Number of Years of the Asset (t).
Now, enter the values appropriately and accordingly for the parameters as required by the Present Amount or Worth (P) is 8, Rate of Depreciation (α) is 18 and Number of Years of the Asset (t) is 10.
Finally, Click on Calculate
As you can see from the screenshot above, Nickzom Calculator– The Calculator Encyclopedia solves for the book value and presents the formula, workings and steps too.
