1. What is Straight-Line Depreciation?

Straight-line depreciation is the simplest method for 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:

• \( \text{Cost} \) — Original cost of the asset (USD)
• \( \text{Salvage} \) — Estimated salvage value at end of useful life (USD)
• \( \text{Life} \) — Useful life of the asset in years

Explanation: The formula spreads the depreciable base (cost minus salvage value) evenly over the asset's useful life.

3. Importance of Depreciation Calculation

Details: Accurate depreciation calculation is crucial for financial reporting, tax purposes, and understanding the true cost of asset ownership over time.

4. Using the Calculator

Tips: Enter the asset's original cost, estimated salvage value, and useful life in years. All values must be valid (cost ≥ salvage, life > 0).

5. Frequently Asked Questions (FAQ)

Q1: When is straight-line depreciation most appropriate?
A: It's best for assets that provide consistent benefits over their useful lives, like office furniture or buildings.

Q2: What's the difference between cost and salvage value?
A: Cost is what you paid for the asset; salvage value is what you expect to recover when disposing of it at end of its life.

Q3: How do I determine useful life?
A: Useful life can be based on IRS guidelines, manufacturer specifications, or your company's experience with similar assets.

Q4: Are there other depreciation methods?
A: Yes, including declining balance, sum-of-years-digits, and units-of-production methods.

Q5: Does this work for tax purposes?
A: While straight-line is GAAP-compliant, tax depreciation often uses MACRS (Modified Accelerated Cost Recovery System).