Easy-to-follow video tutorials help you learn software, creative, and business skills.Become a member
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.
Get unlimited access to all courses for just $25/month.Become a member
82 Video lessons · 80359 Viewers
80 Video lessons · 132730 Viewers
52 Video lessons · 66269 Viewers
59 Video lessons · 52047 Viewers
Access exercise files from a button right under the course name.
Search within course videos and transcripts, and jump right to the results.
Remove icons showing you already watched videos if you want to start over.
Make the video wide, narrow, full-screen, or pop the player out of the page into its own window.
Click on text in the transcript to jump to that spot in the video. As the video plays, the relevant spot in the transcript will be highlighted.
Your file was successfully uploaded.