Straight-line depreciation is the simplest common depreciation method because it allocates the depreciable amount evenly over the asset's useful life. This calculator is useful for creating a quick estimate of annual depreciation, accumulated depreciation, and book value.
Quick Answer
Annual Depreciation = (Cost β Salvage Value) Γ· Useful Life
Book Value = Cost β Accumulated Depreciation
Inputs Explained
Asset cost is the starting cost used in the calculation. Salvage value is the expected value remaining at the end of the useful life. Useful life is the number of years or periods over which the depreciable amount is allocated.
How to Use the Calculator
- Enter the original asset cost.
- Enter the expected salvage value.
- Enter useful life in years or another supported period.
- Calculate the annual depreciation and review the resulting book value.
Worked Examples
Example 1: $10,000 asset
Cost = $10,000, salvage value = $1,000, useful life = 5 years. Depreciable amount = $9,000. Annual depreciation = $1,800.
Example 2: $30,000 asset
With a $5,000 salvage value and 10-year useful life: ($30,000 β $5,000) Γ· 10 = $2,500 per year.
Example 3: No salvage value
A $12,000 asset with a 4-year life and $0 salvage value produces $12,000 Γ· 4 = $3,000 per year.
Five-Year Example Table
| Year | Annual Depreciation | Accumulated Depreciation | Book Value |
|---|---|---|---|
| 1 | $1,800 | $1,800 | $8,200 |
| 2 | $1,800 | $3,600 | $6,400 |
| 3 | $1,800 | $5,400 | $4,600 |
| 4 | $1,800 | $7,200 | $2,800 |
| 5 | $1,800 | $9,000 | $1,000 |
Why the Formula Works
Straight-line depreciation first removes the expected salvage value from the original cost. The remaining depreciable amount is then divided equally across the useful life. Because the expense is constant, the book value falls by the same amount each period until it reaches the assumed salvage value.
Common Mistakes
- Forgetting to subtract salvage value.
- Using months as years without converting the useful life correctly.
- Assuming the straight-line method is required for every accounting or tax situation.
- Continuing depreciation below the permitted residual value.
Important
This calculator is for educational and general informational purposes and is not accounting, tax, or financial advice. Actual depreciation treatment may require specific conventions and rules. Confirm important reporting or tax decisions with a qualified professional.