Straight- line Depreciation

Front

What is straight-line depreciation?

Back

A method of calculating depreciation where the asset's value is reduced evenly over its useful life.

Front

What is salvage value?

Back

The estimated amount that an asset will be worth at the end of its useful life.

Front

How do you calculate annual depreciation using the straight-line method?

Back

(Original cost – salvage value) / useful life.

Front

What is accumulated depreciation?

Back

The total amount of depreciation that has been expensed over time for an asset.

Front

List three methods of depreciation.

Back

Straight line method, declining balance method, and units of production method.

Front

If a camera costs $10,000 and has a salvage value of $2,000 with a useful life of 20 years, what is the annual depreciation?

Back

$400.

Front

What is the formula for calculating depreciation expense?

Back

Depreciation Expense = (Cost - Salvage Value) / Useful Life.

Front

What does useful life mean in terms of depreciation?

Back

The estimated period over which an asset is expected to be used.

Front

What is the difference between straight-line depreciation and declining balance depreciation?

Back

Straight-line depreciation allocates an equal amount of depreciation each year, while declining balance depreciation allocates a higher amount in the earlier years.

Front

What is the purpose of calculating depreciation?

Back

To allocate the cost of an asset over its useful life and reflect its decreasing value.