Explain how straight- line depreciation is computed.
1. Straight line depreciation:
Under the straight-line method of depreciation, recognize depreciation expense evenly With Constant Amount over the estimated useful life of an asset.
The straight-line depreciation calculation steps are:
Step 1: Calculate the initial cost of the asset that has been recognized as a fixed asset.
Step 2: Subtract the estimated salvage value (or)Residual value of the asset from cost of the Asset
Step 3: Identify the estimated useful life of the asset.
(Simply use a standard useful life for each class of assets.)
Step 4 : Divide the estimated useful life (in years) into 1 to arrive at the straight-line depreciation rate. i.e(1/Estimated useful life)
Step 5 : Multiply the depreciation rate by the asset cost (less salvage value).
Above steps simply be like under :
(Cost of the Asset – Salvage value)/ Estimated useful life of the Asset
(Cost of the Asset – salvage Value)*Rate of Depreciation under SLM