How to Calculate Straight Line Depreciation

Straight-line Depreciation is used to depreciate Fixed Assets in equal amounts over the life of the asset. The basic formula to calculate Straight-line Depreciation is: (Cost – Salvage Value) / Class Life

Example Depreciation Problem

To show the various methods used to calculate depreciation, we will use the following asset for each method. (Units are provided for use in the calculating of Units of Activity depreciation method.)

Asset 120xx Ford F350
Asset NameVehicles
Useful Life5 years
Cost (Basis)$40,000
Salvage Value$2,000
Units: Miles100,000
A video explaining Straight Line method of depreciating an asset.

How to Calculate Straight Line Depreciation

Straight Line Depreciation spreads the cost recovery (expensing) of an asset evenly over the class life of the asset. The formula to calculate Straight Line Depreciation is:

(Cost – Salvage) / Useful Life = Depreciation Expense

In the case of the first example asset, the Ford F350 truck has a cost of $40,000, a salvage value of $2,000, and a useful life of 5 years.

When we enter those details into the formula for Straight Line Depreciation, we get this:

($40,000 – $2,000) / 5 = $7,600

This means the depreciation expense for the first year of the asset is $7,600.

If the company is tracking its depreciation monthly, the amount of the adjusting entry done each month is $7,600 / 12 = $633.

What is the Journal Entry to Record Straight-line Depreciation?

To record depreciation, an adjusting journal entry is done either once a month or once a year. Generally Accepted Accounting Principles require a monthly entry for those businesses required to follow GAAP. The journal entry to record one month of depreciation expense for this asset is:

Depreciation Expense633
Accumulated Depreciation633
A video explaining Straight Line method of depreciating an asset.

For more information on Generally Accepted Accounting Principles, check out this video:

For more examples of Straight Line Depreciation, watch this video:

A video explaining Straight Line method of depreciating an asset.

For more details on calculating depreciation using other methods, check out these articles:

Caroline Grimm

Caroline Grimm is an accounting educator and a small business enthusiast. She holds Masters and Bachelor degrees in Business Administration. She is the author of 13 books and the creator of Accounting How To YouTube channel and blog. For more information visit:

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