Straight Line Depreciation Calculator

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Straight Line Depreciation Calculator

Results Summary

Annual Depreciation: $0.00
Monthly Depreciation: $0.00
Depreciable Cost: $0.00
Annual Rate: 0%
function calculateDepreciation() { var cost = parseFloat(document.getElementById('assetCost').value); var salvage = parseFloat(document.getElementById('salvageValue').value); var life = parseFloat(document.getElementById('usefulLife').value); var resultsDiv = document.getElementById('resultsArea'); if (isNaN(cost) || isNaN(salvage) || isNaN(life) || life cost) { alert("Salvage value cannot be greater than the asset cost."); return; } var depreciableBasis = cost – salvage; var annualDepreciation = depreciableBasis / life; var monthlyDepreciation = annualDepreciation / 12; var annualRate = (1 / life) * 100; document.getElementById('annualResult').innerHTML = '$' + annualDepreciation.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}); document.getElementById('monthlyResult').innerHTML = '$' + monthlyDepreciation.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}); document.getElementById('depreciableCost').innerHTML = '$' + depreciableBasis.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}); document.getElementById('rateResult').innerHTML = annualRate.toFixed(2) + '%'; resultsDiv.style.display = 'block'; resultsDiv.scrollIntoView({ behavior: 'smooth' }); }

Understanding Straight Line Depreciation

Straight line depreciation is the simplest and most commonly used method for calculating the decrease in value of an asset over time. This accounting method spreads the cost of a tangible asset evenly across its estimated useful life.

The Straight Line Depreciation Formula

To calculate the annual depreciation expense, you use the following mathematical formula:

Annual Depreciation = (Asset Cost – Salvage Value) / Useful Life

Key Terms Explained

  • Asset Cost: The total purchase price of the item, including shipping, taxes, and installation costs.
  • Salvage Value: Also known as residual value, this is the estimated amount the asset will be worth at the end of its useful life.
  • Useful Life: The period during which the asset is expected to be functional and productive for the business.
  • Depreciable Cost: The total amount of the asset's value that will be depreciated (Cost minus Salvage Value).

Practical Example

Imagine a business purchases a commercial delivery van for $45,000. They expect to use the van for 8 years, after which they believe it can be sold for parts or scrap for $5,000.

  1. Depreciable Basis: $45,000 – $5,000 = $40,000
  2. Annual Depreciation: $40,000 / 8 years = $5,000 per year
  3. Monthly Depreciation: $5,000 / 12 months = $416.67 per month

Why Use Straight Line Depreciation?

This method is highly favored by small businesses and accountants because of its predictability and simplicity. Unlike accelerated methods like Double Declining Balance, the straight-line method results in fewer errors and provides a consistent expense report on income statements year after year, which is helpful for long-term budgeting and financial planning.

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