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SLN: Calculating depreciation using the straight-line method

From: Excel 2010: Financial Functions in Depth

Video: SLN: Calculating depreciation using the straight-line method

The most straightforward method you can use to calculate depreciation is the straight line method. As the name implies, the straight line method assigns depreciation evenly over the economic life of the asset. The starting amount is the asset's purchase price and ending value is the asset's salvage value. If your asset has an economic life of 10 years and a salvage value of 0 for example, you will depreciate by 10% each year until its value reaches 0. To calculate straight line depreciation, you use in the SLN function. The SLM function calculates the amount of depreciation for a given period which is usually a year.

SLN: Calculating depreciation using the straight-line method

The most straightforward method you can use to calculate depreciation is the straight line method. As the name implies, the straight line method assigns depreciation evenly over the economic life of the asset. The starting amount is the asset's purchase price and ending value is the asset's salvage value. If your asset has an economic life of 10 years and a salvage value of 0 for example, you will depreciate by 10% each year until its value reaches 0. To calculate straight line depreciation, you use in the SLN function. The SLM function calculates the amount of depreciation for a given period which is usually a year.

And the function takes three arguments. Those are the initial cost, the salvage value which is the amount at which you could sell the item for scrap, and then the economic life, which for a computer is assumed to be 5 years. So let's go ahead and create the formula. So clicking in cell B11, =sln, which is our functions, and a left parenthesis. We have the cost which is in cell b5. Type a comma. Salvage value is in b7, type a comma, and then the economic life in years is in cell b9. Type a right parenthesis.

Everything looks good. And then I will press the Tab key so I don't scroll down. And we see that there is a depreciation of $230 per year and we can verify that's correct by multiplying the depreciation per year, which is 230, by 5 and that gives us a $1,150 and then if we add the salvage value of 150, we get our total of the initial cost. Straight line depreciation is the most conservative approach you can take to depreciation. It assumes that you will hold on to the asset until the end of its economic life so you should spread out the tax benefits of the depreciation while you still own the asset.

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Excel 2010: Financial Functions in Depth

52 video lessons · 13303 viewers

Curt Frye
Author

 
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  1. 2m 11s
    1. Welcome
      1m 6s
    2. Using the exercise files
      36s
    3. Disclaimer
      29s
  2. 28m 32s
    1. PMT: Calculating a loan payment
      3m 31s
    2. PPMT and IPMT: Calculating principal and interest per loan payment
      4m 18s
    3. CUMPRINC and CUMIPMT: Calculating cumulative principal and interest paid between periods
      4m 30s
    4. ISPMT: Calculating interest paid during a specific period
      2m 13s
    5. EFFECT and NOMINAL: Finding nominal and effective interest rates
      3m 31s
    6. ACCRINT and ACCRINTM: Calculating accrued interest for investments
      4m 15s
    7. RATE: Discovering the interest rate of an annuity
      2m 41s
    8. NPER: Calculating the number of periods in an investment
      3m 33s
  3. 19m 5s
    1. SLN: Calculating depreciation using the straight-line method
      1m 48s
    2. DB: Calculating depreciation using the declining balance method
      3m 10s
    3. DDB: Calculating depreciation using the double-declining balance method
      3m 20s
    4. SYD: Calculating depreciation for a specified period
      2m 13s
    5. VDB: Calculating declining balance depreciation for a partial period
      3m 24s
    6. AMORDEGRC: Calculating depreciation using a depreciation coefficient
      2m 27s
    7. AMORLINC: Calculating depreciation for each accounting period
      2m 43s
  4. 22m 33s
    1. FV: Calculating the future value of an investment
      2m 48s
    2. FVSCHEDULE: Calculating the future value of an investment with variable returns
      2m 21s
    3. PV: Calculating the present value of an investment
      2m 6s
    4. NPV: Calculating the net present value of an investment
      3m 17s
    5. IRR: Calculating internal rate of return
      2m 33s
    6. XNPV: Calculating net present value given irregular inputs
      2m 32s
    7. XIRR: Calculating internal rate of return for irregular cash flows
      1m 48s
    8. MIRR: Calculating internal rate of return for mixed cash flows
      2m 2s
    9. DISC: Calculating the discount rate of a security
      3m 6s
  5. 24m 12s
    1. COUPDAYBS: Calculating total days between coupon beginning and settlement
      3m 2s
    2. COUPDAYS: Calculating days in the settlement date's coupon period
      2m 48s
    3. COUPDAYSNC: Calculating days from the settlement date to the next coupon date
      3m 1s
    4. COUPNCD: Calculating the next coupon date after the settlement date
      2m 43s
    5. COUPNUM: Calculating the number of coupons between settlement and maturity
      2m 55s
    6. COUPPCD: Calculating the date of a coupon due immediately before settlement
      3m 4s
    7. DURATION: Calculating the annual duration of a security
      3m 20s
    8. MDURATION: Calculating the duration of a security using the modified Macauley method
      3m 19s
  6. 28m 43s
    1. DOLLARDE and DOLLARFR: Converting between fractional prices and decimal prices
      2m 36s
    2. INTRATE: Calculating the interest rate of a fully invested security
      2m 50s
    3. RECEIVED: Calculating the value at maturity of a fully invested security
      2m 46s
    4. PRICE: Calculating the price of a security that pays periodic interest
      3m 19s
    5. PRICEDISC: Calculating the price of a discounted security
      2m 48s
    6. PRICEMAT: Calculating the price of a security that pays interest at maturity
      1m 57s
    7. TBILLEQ: Calculating the bond-equivalent yield for a Treasury bill
      1m 50s
    8. TBILLPRICE: Calculating the price for a Treasury bill
      1m 31s
    9. TBILLYIELD: Calculating the yield of a Treasury bill
      1m 41s
    10. YIELD: Calculating the yield of a security that pays periodic interest
      2m 59s
    11. YIELDDISC: Calculating the annual yield for a discounted security
      2m 9s
    12. YIELDMAT: Calculating the annual yield of a security that pays interest at maturity
      2m 17s
  7. 12m 1s
    1. ODDFPRICE: Calculating the price of a security with an odd first period
      3m 17s
    2. ODDFYIELD: Calculating the yield of a security with an odd first period
      3m 3s
    3. ODDLPRICE: Calculating the price of a security with an odd last period
      2m 44s
    4. ODDLYIELD: Calculating the yield of a security with an odd last period
      2m 57s
  8. 1m 5s
    1. Additional resources
      1m 5s

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