# Straight Line Depreciation Method

The straight line depreciation method calculates depreciation expense by spreading the cost of the fixed asset evenly over the life of that asset.

## Depreciation Calculation without Salvage Value

To calculate depreciation expense on a fixed asset without a salvage value the cost is divided by the life.

SL = Cost / Life

Example: A table is purchased for $567.65. The expected life is 5 years.

Calculate the annual depreciation as follows:

567.65 / 5 = 113.53

Each year for 5 years $113.53 would be expensed. At the end of 5 years the book value of the asset would be zero. (The cost of $567.65 less 5 years of depreciation expense at $113.53 per year.)

## Depreciation Calculation with Salvage Value

To calculate depreciation expense on a fixed asset with a salvage value, the depreciable value of the fixed asset is divided by the life of that asset. The depreciable basis is the cost less the salvage value.

SL = (Cost - Salvage Value) / Life

Example: A table is purchased for $567.65. The expected life is 5 years. There is a $50.00 salvage value.

Calculate the annual depreciation as follows:

(567.65 - 50.00) / 5 = 103.53

Each year for 5 years $103.53 would be expensed. At the end of 5 years the book value of the asset would be $50.00. (The cost of $567.65 less 5 years of depreciation expense at $103.53 per year.)

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