Straight-Line Depreciation

Question 1

what is straight line depreciation

Answer 1

a fixed cost depreciation method where the expense is spread out evenly over an asset’s useful life

Question 2

what are the 5 columns in a depreciation schedule?

Answer 2

• year
• opening book value (£)
• depreciation expense (£)
• accumulated depreciation (£)
• closing book value (£)

Question 3

what is step 1 in doing straight line depreciation method

Answer 3

write down what you know

(e.g., asset cost, useful life, residual value etc.)

Question 4

what is step 2

Answer 4

build a depreciation schedule

Question 5

what is step 3

Answer 5

calculate depreciation expense, accumulated depreciation & book values

Question 6

how do you calculate depreciation expense with straight-line depreciation

Answer 6

straight line depreciation rate * depreciable cost

(e.g., 10% * £10,000 = £1,000 depreciation expense)

Question 7

how do you calculate straight-line depreciation rate

Answer 7

1/useful life

(e.g., 1/10 years = 10% depreciation rate)

Question 8

how do you calculate depreciable cost

Answer 8

asset cost - residual value