1. What is Straight-Line Depreciation?

Straight-line depreciation is the simplest and most commonly used method of allocating the cost of a capital asset over its useful life. It assumes the asset will lose the same amount of value each year.

2. How Does the Calculator Work?

The calculator uses the straight-line depreciation formula:

Where:

• \( \text{Cost} \) — Original purchase price of the asset ($)
• \( \text{Salvage Value} \) — Estimated resale value at end of useful life ($)
• \( \text{Useful Life} \) — Expected number of years the asset will be productive

Explanation: This method evenly spreads the depreciable amount (cost minus salvage value) over the asset's useful life.

3. Importance of Depreciation Calculation

Details: Accurate depreciation calculation is essential for proper financial reporting, tax calculations, and business planning. It helps companies allocate the cost of assets appropriately over time.

4. Using the Calculator

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

5. Frequently Asked Questions (FAQ)

Q1: When should I use straight-line depreciation?
A: Straight-line is best for assets that lose value evenly over time, such as office furniture, buildings, or patents.

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

Q3: How do I determine an asset's useful life?
A: Useful life depends on the asset type, usage patterns, and industry standards. The IRS provides guidelines for various asset classes.

Q4: Are there other depreciation methods available?
A: Yes, other methods include declining balance, sum-of-years'-digits, and units of production methods, each suitable for different scenarios.

Q5: Is salvage value always required?
A: While technically required, many assets have minimal salvage value. In such cases, salvage value can be set to zero for simplification.