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.)