The straight line depreciation

Businessman holding a touchpadTo compute straight line depreciation use the following formula:

(Asset cost minus salvage value)/ Useful life

Because salvage value is recouped, the straight line method does not depreciate below the salvage value

Example

Uncle Joe bought an equipment for $24,000. Uncle Joe estimates the useful life four years with a salvage value of $4,000.

Using our straight line formula, depreciation expense is computed as follows:

(24,000 minus 4,000) /4 = 5,000 depreciation

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