Understanding Straight Line Depreciation

What is the definition of straight line depreciation?

• Straight line depreciation is a method of calculating depreciation based on the asset's market value.

• Straight line depreciation is only applicable to intangible assets.

• Straight line depreciation is a method of calculating depreciation by evenly distributing the cost of an asset over its useful life.

• Straight line depreciation allows for accelerated depreciation in the early years of an asset's life.

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

• Annual Depreciation = Cost / Useful Life

• Annual Depreciation = (Cost + Salvage Value) / Useful Life

• Annual Depreciation = (Cost - Useful Life) / Salvage Value

• Annual Depreciation = (Cost - Salvage Value) / Useful Life

What is the formula for determining the annual depreciation expense?

• (Salvage Value - Cost of Asset) / Useful Life

• (Cost of Asset + Salvage Value) / Useful Life

• (Cost of Asset - Salvage Value) / Useful Life

• (Cost of Asset - Useful Life) / Salvage Value

What journal entry is made to record depreciation expense?

• Debit Accumulated Depreciation, Credit Depreciation Expense

• Debit Depreciation Expense, Credit Accumulated Depreciation

• Debit Depreciation Expense, Credit Cash

• Debit Equipment, Credit Depreciation Expense

How does straight line depreciation affect financial statements?

• Straight line depreciation reduces net income on the income statement and decreases the asset's book value on the balance sheet.

• Straight line depreciation increases net income on the income statement.

• Straight line depreciation has no effect on the balance sheet.

• Straight line depreciation only affects cash flow statements.