Why doesn't the DDB function work all the time?

[Guest]

I've noticed when setting up a depreciation table using the DDB function it
won't depreciate an asset down to salvage value if there's a big difference
between the original cost of the asset and the salvage value.

For instance, depreciate a $260,000 tractor with a $7,000 salvage value for
7 years the final book value for the asset is $24,664 instead of $7,000.

Is this correct? Am I doing something wrong?

 

[mphell0]

It is because of the way that excel calculates depreciation (see the
help for
more information). Instead of leaving the last component of the
function
blank (the [factor]) put a 3 and it will give you your 7000.

=DDB(cost, salvage, life, period, [factor])

for the first year it would read:

=DDB(260000, 7000, 7, 1, 3)

 

[mphell0]

Scratch that. My previous post works for 7000 but I tried putting in a
few
other numbers for the salvage value and it didn't work for lower
numbers. For
example with a salvage value of $2000 the total depreciated value after
7
years according to excel is $5172.58.

Try using DB instead of DDB it gives you a more accurate (but not
exact)
estimate of the depreciated value. I think this is because excel
automatically
rounds off some of the numbers used in the calculation. See help for a
better
explanation on this.