How do I calculate depreciation for my assets?

How do I calculate depreciation for my assets?

To calculate depreciation, you can use several methods like straight-line, declining balance, or units of production. Which method are you interested in?

Can you explain the straight-line method?

Sure! The straight-line method spreads the cost of the asset evenly over its useful life. You subtract the salvage value from the purchase price, then divide by the number of years.

What if I want to use the declining balance method?

The declining balance method calculates depreciation based on a fixed percentage of the asset's remaining book value each year. It's more accelerated than the straight-line method.

Can you give me an example of both methods?

Absolutely! For a $10,000 asset with a $1,000 salvage value and a 5-year life:

• Straight-line: ($10,000 - $1,000) / 5 = $1,800 per year.
• Declining balance: If using 20%, Year 1 = $10,000 * 20% = $2,000, Year 2 = ($10,000 - $2,000) * 20% = $1,600, and so on.