Calculation
The formula for calculating depreciation uses a looking forward approach and determines depreciation based on the remaining useful life in order to spread depreciation out evenly over an assets life taking into consideration changes in value or life. Depreciation is calculated for each payment. The two depreciation methods are as follows.
• Straight Line
Depreciation Expense equals Asset Cost less Accumulated Depreciation divided by Remaining useful life in months times Depreciation Period.
• Salvage Value
Depreciation Expense equals Asset Cost less Salvage Value less Accumulated Depreciation divided by Remaining useful life in months times Depreciation Period.
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Rules