Straight Line Method Calculator: Easily Compute Annual Asset Depreciation

How to use the tool

1. Cost of Fixed Asset – type the total purchase price (including delivery and installation). Samples: $15,000 or $75,000.
2. Residual Value – enter the expected salvage amount at disposal. Samples: $1,000 or $10,000.
3. Useful Life of Asset (years) – provide the economic life span. Samples: 4 or 10.
4. Press Calculate; the tool shows one consistent yearly charge.

Formula

Annual depreciation is found with:

$$\text{Annual Depreciation}= \frac{\text{Cost} – \text{Residual Value}}{\text{Useful Life (years)}}$$

Example A

• Cost = $15,000
• Residual = $1,000
• Life = 4 years

$$\frac{15{,}000-1{,}000}{4}=3{,}500$$

Your annual depreciation is $3,500.

Example B

• Cost = $75,000
• Residual = $10,000
• Life = 10 years

$$\frac{75{,}000-10{,}000}{10}=6{,}500$$

Your annual depreciation is $6,500.

Quick-Facts

• Straight-line is acceptable under GAAP and IFRS (IAS 16, IFRS.org).
• IRS Publication 946 lists 3–39 year class lives that can differ from useful life (IRS Pub. 946, 2023).
• Residual value typically ranges 5–10 % of cost for machinery (KPMG Global Insights, 2022).
• “Significant parts with different patterns must be depreciated separately” (IAS 16 §43, IFRS.org).

FAQ

What is straight-line depreciation?

It allocates an equal expense to each year of an asset’s useful life, reflecting uniform wear (IRS Pub. 946, 2023).

Why subtract residual value?

You only depreciate the portion of cost expected to be consumed; the salvage amount remains on disposal (IAS 16 §50, IFRS.org).

How do I record it?

Debit Depreciation Expense, credit Accumulated Depreciation each year (Schroeder et al., Intermediate Accounting 14e).

Can useful life differ from tax life?

Yes. Tax law allows accelerated schedules; financial statements may use longer economic lives (IRS Pub. 946, 2023).

How do I handle partial-year ownership?

Prorate the annual number by months held; e.g., 6 months equals 50 % of yearly charge (Deloitte Accounting Manual, 2023).

Which assets are unsuitable for this method?

Assets that lose value faster early on—like vehicles—fit better with declining-balance approaches (PwC Guide to Depreciation, 2022).

Where can I find residual value data?

Manufacturer buy-back programs, secondary-market studies, or appraisal guides such as Blue Book give typical salvage rates (Blue Book, 2023).

Does depreciation affect cash?

It is a non-cash expense reducing taxable income but not immediate cash outflow (FASB ASC 842 glossary).