| Straight Line Depreciation Method | |
| Investing Lesson 4 - Analyzing an Income Statement | |
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Straight Line Depreciation Method purchase price of asset - approximate salvage value Example: You buy a new computer for your business costing approximately $5,000. You expect a salvage value of $200 selling parts when you dispose of it. Accounting rules allow a maximum useful life of five years for computers; in the past, your business has upgraded its hardware every three years, so you think this is a more realistic estimate of useful life, since you are apt to dispose of the computer at that time. Using that information, you would plug it into the formula: $5,000 purchase price - $200 approximate salvage value The answer, $1,600, is the depreciation charges your business would take annually if you were using the straight line method. Next page > Sum of the Years Digits Method> << back, 14, 15, 16, 17, 18, 19, 20, 21, more >> |
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