2016-12-02 00:00:00 Taxes English Learn what straight-line depreciation is and the steps involved in calculating it, and review an example calculation. https://d1bkf7psx818ah.cloudfront.net/wp-content/uploads/2017/03/08214719/brewer-calculates-brewing-vat-depreciation.jpg How to Calculate Straight Line Depreciation

How to Calculate Straight Line Depreciation

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Straight-line depreciation is the most common method used to calculate depreciation, and that amount is applied to an asset over its useful life. The steps involved in calculating it are:

  1. Determine the cost of the asset.
  2. Determine the salvage value of the asset.
  3. Determine the asset’s useful life in years.
  4. Divide 1 by the useful life to determine the depreciation rate.
  5. Multiply this rate by the the cost less the salvage value to get the annual depreciation.

For example, a machine is purchased for $30,000 and will work for five years. At the end of the five years, it can be sold for $8,000. The annual depreciation is:

Depreciation rate = 1 / 5 = 20%Annual depreciation = 20% x ($30,000 – $8,000) = $4,400

References & Resources

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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