How is straight-line depreciation calculated?

The calculation of straight-line depreciation is based on the principle of allocating an asset's cost evenly over its useful life. The correct method involves taking the original cost of the asset, subtracting the salvage value (the estimated resale value at the end of its useful life), and then dividing that difference by the useful life of the asset in years.

This method is often favored for its simplicity and consistency, allowing businesses to predict their annual depreciation expense. It effectively reflects the reduction in value of the asset as it is used over time, providing a clear financial picture that aids in budgeting and forecasting.

The other options present alternative methods or incorrect calculations that do not align with the standard approach to straight-line depreciation, such as simply adding maintenance costs or multiplying cost by lifespan without accounting for salvage value adjustments. These do not adhere to the established formula for calculating depreciation, reinforcing why the first choice is the most accurate representation of straight-line depreciation.