Under the straight-line method, annual depreciation expense is calculated by taking which of the following?

• A. Salvage value minus cost, divided by useful life
• B. Cost minus salvage value, divided by useful life
• C. Cost plus salvage value, divided by useful life
• D. Cost divided by useful life, then subtract salvage value

Answer: (B)

Verified step by step guidance

1. Understand that the straight-line method of depreciation spreads the cost of an asset evenly over its useful life.
2. Identify the key components: Cost of the asset, Salvage value (the estimated residual value at the end of useful life), and Useful life (the period over which the asset is depreciated).
3. Calculate the depreciable amount by subtracting the salvage value from the cost: \(\text{Depreciable Amount} = \text{Cost} - \text{Salvage Value}\).
4. Divide the depreciable amount by the useful life to find the annual depreciation expense: \(\text{Annual Depreciation Expense} = \frac{\text{Cost} - \text{Salvage Value}}{\text{Useful Life}}\).
5. This formula ensures that the asset's cost, less its salvage value, is allocated evenly over each year of its useful life.