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How to calculate straight-line depreciation

Straight-line depreciation spreads cost minus salvage evenly over the asset’s life.

Problem

Equipment costs $50,000, has a salvage value of $5,000 and an 8-year life. What is the depreciation in year 3, and how much is left to depreciate after it?

Keystrokes

  1. fFINx≷y
    0.00

    Start clean.

  2. 50000PV
    50,000.00

    The cost.

  3. 5000FV
    5,000.00

    The salvage value.

  4. 8n
    8.00

    The useful life in years.

  5. 3fSL%T
    5,625.00

    Depreciation in year 3.

  6. x≷y
    28,125.00

    What’s still to be depreciated after year 3.

Answer

Depreciation is $5,625.00 a year, and $28,125.00 remains to be depreciated after year 3.

Why it works

The depreciation functions read cost from PV, salvage from FV and life from n. The year goes in X before the key. They leave the remaining depreciable value in Y, so x≷y shows it.

Book value is the remaining depreciable value plus salvage: RCLFV+ after x≷y.

Questions

What about a partial first year?

The built-in functions work in whole years. For a partial year, multiply the first year’s amount by the fraction of the year held.

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