What Is the Formula for Depreciation Rate?
There are three commonly used formulas for depreciation based on time: declining balance method, straight line method and sum-of-the-years'-digits method. The first formula calculates book value multiplied by depreciation rate; the book value equals cost minus accumulated depreciation. To calculate the depreciation rate for a double declining balance, use straight line depreciation rate multiplied by 200 percent. Likewise, for a 150 percent declining balance, use straight line depreciation rate multiplied by 150 percent.
According to the Accounting Study Guide on Accounting Info, in the straight line method, depreciation equals cost minus residual value divided by useful life. The sum-of-the-years'-digits method calculates depreciation using the following formula: depreciation expense equals cost minus salvage value multiplied by a fraction. Fraction for the first year equals (n) divided by (1+2+3+...+ n). Fraction for the second year equals (n-1) divided by (1+2+3+...+ n). Fraction for the third year equals (n-2) divided by (1+2+3+...+ n). Fraction for the last year equals 1 divided by (1+2+3+...+ n).
Depreciation rate is a process of spreading out the cost of certain assets over the useful life of those assets. Calculator Soup has an online calculator that calculates straight line asset depreciation. To use the calculator, website visitors simply need to enter the asset cost, salvage value, useful life, date placed in service and whether a yearly, monthly or quarterly convention should be used.