4.2 · Non-current assets
Straight-line depreciation assigns the same expense to each year of an asset’s useful life.
Acquisition cost divided by useful life gives the annual depreciation expense.
A machine costs €24,000 and is used for six years. Its value is allocated evenly across those years.
| Year | Year-end book value |
|---|---|
| 1 | €20,000 |
| 2 | €16,000 |
| 3 | €12,000 |
The book value falls by €4,000 each year. After six years, the machine is fully depreciated.
The acquisition cost is spread evenly across the asset’s useful life.
€24,000 ÷ 6 years = €4,000 per year
For €24,000 over six years, that is €4,000 a year.
The book value falls by €4,000 each year. After six years, the machine is fully depreciated.
After three years, accumulated depreciation is €12,000. The remaining book value is therefore €12,000.
Episode 2 · Depreciation
How do you calculate annual straight-line depreciation?