ACC 310F Quiz: Straight Line Notes
Document Summary
Under the straight-line method, companies expense the same amount of depreciation for each year of the asset"s useful life. It is measured solely by the passage of time. To compute depreciation expense under the straight-line method, companies need to determine depreciable cost. As indicated above, depreciable cost is the cost of the asset less its salvage value. It represents the total amount subject to depreciation. Under the straight-line method, to determine annual depreciation expense, we divide depreciable cost by the asset"s useful life. The computation below shows the first year"s depreciation expense for barb"s florists. Alternatively, we also can compute an annual rate of depreciation. In this case, the rate is 20% (100% 4 5 years). When a company uses an annual straight-line rate, it applies the percentage rate to the depreciable cost of the asset. The depreciation schedule below uses an annual rate. Note that the depreciation expense of ,400 is the same each year.