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How is straight-line depreciation calculated?

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Question: How is straight-line depreciation calculated?

Options:

  1. Cost of asset - Salvage value / Useful life
  2. Cost of asset / Useful life
  3. Cost of asset - Salvage value
  4. Cost of asset / Salvage value

Correct Answer: Cost of asset - Salvage value / Useful life

Solution: 

Straight-line depreciation is calculated by taking the cost of the asset minus its salvage value and dividing it by its useful life.

How is straight-line depreciation calculated?

Practice Questions

Q1
How is straight-line depreciation calculated?
  1. Cost of asset - Salvage value / Useful life
  2. Cost of asset / Useful life
  3. Cost of asset - Salvage value
  4. Cost of asset / Salvage value

Questions & Step-by-Step Solutions

How is straight-line depreciation calculated?
  • Step 1: Determine the cost of the asset. This is the amount you paid to acquire it.
  • Step 2: Find out the salvage value. This is the estimated value of the asset at the end of its useful life.
  • Step 3: Calculate the useful life of the asset. This is how long you expect to use the asset.
  • Step 4: Subtract the salvage value from the cost of the asset. This gives you the total amount that will be depreciated.
  • Step 5: Divide the result from Step 4 by the useful life of the asset. This gives you the annual straight-line depreciation.
  • Straight-Line Depreciation – A method of allocating the cost of a tangible asset over its useful life evenly.
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