Series 22: 2.2.1.3.1. Straight-Line Depreciation

Taken from our Series 22 Top-off Online Guide

2.2.1.3.1.  Straight-Line Depreciation

Straight-line depreciation is the oldest and simplest method. To calculate it, you simply divide the asset’s cost less its salvage value by its recovery period.

depreciation expense = cost-salvage value / recovery period

This allocation assumes equal usefulness over the economic life of the asset, and depreciation is expensed at the same amount each year.

Example: A five-year asset costs $100,000. Because the asset has no alternative use, it has no salvage value. Straight-line depreciation is $20,000 each year until the asset is fully depreciated.

Straight-Line Depreciation

End of Year

Book Value

Calculation

Depreciation

0

$100,000

-

-

1

$80,000

$100,000 / 5

$20,000

2

$60,000

$100,000 / 5

$20,000

3

$40,000

$100,000 / 5

$20,000

4

$20,000

$100,000 / 5

$20,000

5

$0

$100,000 / 5

$20,000

Total

-

-

$100,000
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