until 2 years before the expiration of the estimated useful life, using the formula: annual depreciation rate = 2 ÷ estimated depreciable life × 100%, annual depreciation = net book value of fixed assets at the beginning of the period × annual depreciation rate. Opening net book value of fixed assets = original value of fixed assets - accumulated depreciation.
Generally to the last two years there will be, using the double declining balance method of depreciation will be the estimated net salvage value is also depreciated or accrued depreciation has not been depreciated.
So the last 2 years with the average annual method, you can ensure that the estimated net residual value of the exact same.
Example:
A hospital has a machine and equipment original price of 600,000 yuan, the expected useful life of 5 years, the estimated net residual value of 24,000 yuan. Asked to calculate what is the depreciation for the third year? What is the depreciation for the last year?
Annual depreciation rate = 2/5 = 40%
Depreciation due in the first year = 600000 * 40% = 240,000 yuan
Depreciation due in the second year = (600000-240,000)*40% = 144,000 yuan
Depreciation due in the third year = (600000-240,000- 144000)*40%=86400 yuan
Depreciation due in each of the fourth and fifth years = (600000-240,000-144000-86400-24000)/2=52800 yuan
BUT: If you don't use the annual average method but continue to use the double-balance method, the next
Depreciation due in the fourth year = (600000-240,000-144000-86400-24000)/2=52800 yuan
BUT: If you don't use the annual average method but continue to use double balance, the next
The fourth year depreciation = (600000-240,000-144000-86400)*40% = $51,840
Depreciation due in the fifth year = (600000-240,000-144000-86400-51840)*40% = $31,104
This is an overstatement of $30,144 compared to the correct method, even though the estimated net salvage value is reduced by $30,144. Even though the estimated net salvage value has to be reduced by $30,144, it is not reasonable.