Straight Line Depreciation Rate Calculator
Straight Line Rate (%):
Annual Depreciation Amount:
Monthly Depreciation Amount:
Total Depreciable Base:
How to Calculate Straight Line Rate
The straight-line depreciation method is the simplest and most commonly used way to calculate the loss in value of an asset over time. It assumes that the asset will lose an equal amount of value every year of its useful life.
The Straight Line Rate Formula
To calculate the annual straight line rate as a percentage, you use the following formula:
Straight Line Rate = (1 / Useful Life in Years) x 100
To calculate the actual dollar amount of annual depreciation, use this formula:
Annual Depreciation = (Cost of Asset – Salvage Value) / Useful Life
Key Terms Explained
- Asset Cost: The total amount paid to acquire the asset, including shipping and installation.
- Salvage Value: The estimated value the asset will have at the end of its useful life (also known as scrap value).
- Useful Life: The period during which the asset is expected to be productive for the business.
- Depreciable Base: The total amount that will be depreciated (Cost minus Salvage Value).
Example Calculation
Imagine a company buys a machine for $12,000. They expect it to last for 5 years and have a salvage value of $2,000 at the end of that period.
- Rate: 1 / 5 years = 0.20 or 20% per year.
- Depreciable Base: $12,000 – $2,000 = $10,000.
- Annual Depreciation: $10,000 / 5 years = $2,000 per year.
Using the straight-line rate, the company would record $2,000 in depreciation expense every year for five years until the asset reaches its salvage value.