1. What Is Straight Line Depreciation?

Straight line depreciation is the simplest and most commonly used method of calculating depreciation expense. It allocates an equal amount of depreciation each year over the asset's useful life.

2. How Does The Calculator Work?

The calculator uses the straight line depreciation formula:

Where:

• \( Cost \) — Original cost of the asset ($)
• \( Salvage \) — Estimated salvage value at end of useful life ($)
• \( Life \) — Useful life of the asset (years)

Explanation: The formula calculates the annual depreciation expense by evenly distributing the depreciable base (cost minus salvage value) over the asset's useful life.

3. Importance Of Depreciation Calculation

Details: Accurate depreciation calculation is essential for financial reporting, tax purposes, and business planning. It helps companies properly allocate the cost of assets over their useful lives.

4. Using The Calculator

Tips: Enter the original cost of the asset, estimated salvage value, and useful life in years. All values must be valid (cost ≥ salvage, life ≥ 1 year).

5. Frequently Asked Questions (FAQ)

Q1: When should straight line depreciation be used?
A: Straight line depreciation is appropriate when the asset's economic benefits are consumed evenly over its useful life, and there's no specific pattern of usage decline.

Q2: What's the difference between cost and salvage value?
A: Cost is the original purchase price, while salvage value is the estimated resale value at the end of the asset's useful life.

Q3: Can salvage value be zero?
A: Yes, if the asset is expected to have no resale value at the end of its useful life, salvage value can be set to zero.

Q4: How do I determine an asset's useful life?
A: Useful life is based on the asset's expected service period, which can be determined from manufacturer specifications, industry standards, or company experience.

Q5: Are there other depreciation methods besides straight line?
A: Yes, other common methods include declining balance, sum-of-the-years'-digits, and units of production methods, each appropriate for different asset usage patterns.