Straight-Line Depreciation Without Guesswork
Calculate and record straight-line depreciation for a fixed asset.
A packaging machine costs $96,000, has a $6,000 residual value, and is expected to be used for five years. Straight-line depreciation = (cost - residual value) / useful life. Using the full purchase price without residual value overstates depreciation and understates net book value. Start with cost Cost = $96,000. Use the capitalized cost of the asset ready for service, not the budget request or vendor quote alone. Subtract residual value $96,000 - $6,000 = $90,000 depreciable cost. Only the portion expected to be consumed is allocated to expense. Divide by useful life $90,000 / 5 years = $18,000 annual…
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