Definition of Straight Line Depreciation
Straight-line depreciation is a method of charging depreciation expense evenly over the useful life of the assets. Since the depreciation expense is related to assets that were in use for generating revenues, the straight-line depreciation method is suitable when it can be reasonably estimated that the pattern of cash flows to the entity are also evenly distributed over the useful life of the asset.
The straight-line depreciation is calculated using this formula.
Example of Straight Line Depreciation:
A plant has a cost of $500,000 and a useful life of 10 years. At the end of 10 years, the plant can be sold for $50,000. The straight-line depreciation will be:
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