The image above represents depreciation value. To calculate the depreciation value using the declining balance method, three essential parameters are needed and these are Present Amount or Worth (P), Rate of Depreciation (α) and Number of Years of the Asset (t).
The formula for calculating depreciation value:
D = Pα(1 – α)(t – 1)
Where:
D = Depreciation Value
P = Present worth or amount
t = Number of years of the asset
α = rate of depreciation
Let’s solve an example;
Find the depreciation value when the present amount or worth is 14, the rate of depreciation is 2 and the number of years of the asset is 10.
This implies that;
P = Present worth or amount = 14
t = Number of years of the asset = 10
α = rate of depreciation = 2
D = Pα(1 – α)(t – 1)
D = 14(2)(1 – 2)(10 – 1)
Then, D = 14(2)(-1)9
D = 14(2)(-1)
D = -28
Therefore, the depreciation value is ₦ -28.
Calculating the Present Amount or Worth when the Depreciation Value, the Rate of Depreciation and the Number of Years of the Asset are Given
P = D / α (1 – α)(t – 1)
Where;
P = Present worth or amount
D = Depreciation Value
t = Number of years of the asset
α = rate of depreciation
Let’s solve an example;
Find the present amount or worth when the depreciation value is 40, the rate of depreciation is 10 and the number of years of the asset is 9.
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This implies that;
D = Depreciation Value = 40
t = Number of years of the asset = 9
α = rate of depreciation = 10
P = D / α (1 – α)(t – 1)
That is, P = 40 / 10 (1 – 10)(9 – 1)
P = 40 / 10 (- 9)(8)
P = 40 / 10 (- 43046721)
So, P = 40 / – 430467210
P = 9.29e-8
Therefore, the present amount or worth is 9.29e-8.
Read more:Â How to Calculate and Solve for Depreciation Value | Straight line Method | Depreciation
Calculating the Rate of Depreciation when the Depreciation Value, the Present Amount or Worth and the Number of Years of the Asset are Given
α = 1 – e In (D / P) / t – 1
Where;
α = rate of depreciation
D = Depreciation Value
P = Present worth or amount
t = Number of years of the asset
Let’s solve an example;
Find the rate of depreciation when the depreciation value is 30, the present amount or worth is 10 and the number of years of the asset is 7.
This implies that;
D = Depreciation Value = 30
P = Present worth or amount = 10
t = Number of years of the asset = 7
α = 1 – e In (D / P) / t – 1
α = 1 – e In (30 / 10) / 7 – 1
So, α = 1 – e In (3) / 6
α = 1 – e 1.098 / 6
α = 1 – e 0.183
Then, α = 1 – 0
α = 0
Therefore, the rate of depreciation is 0.
Calculating the Number of Years of the Asset when the Depreciation Value, the Present Amount or Worth and the Rate of Depreciation are Given
t = (In (D / Pα) / In (1 – α)) + 1
Where;
t = Number of years of the asset
D = Depreciation Value
P = Present worth or amount
α = rate of depreciation
Let’s solve an example;
Find the number of years of the asset when the depreciation value is 35, the present amount or worth is 5 and the rate of depreciation is 5.
This implies that;
D = Depreciation Value = 35
P = Present worth or amount = 5
α = rate of depreciation = 5
t = (In (D / Pα) / In (1 – α)) + 1
t = (In (35 / 5 x 5) / In (1 – 5)) + 1
That is, t = (In (35 / 25) / In (- 4)) + 1
t = (In (1.4) / In (- 4)) + 1
t = (0.336 / – 1.386) + 1
So, t = – 0.24 + 1
t = – 1.24
Therefore, the number of years of the asset is – 1.24.
How to Calculate Depreciation Value | Declining Balance Method Using Nickzom Calculator
Nickzom Calculator – The Calculator Encyclopedia is capable of calculating the depreciation value.
To get the answer and workings of the depreciation 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 Depreciation Value under Depreciation
The screenshot below displays the page or activity to enter your values, to get the answer for the depreciation 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 14, Rate of Depreciation (α) is 2 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 depreciation value and presents the formula, workings and steps too.
