How do you calculate Straight-Line Depreciation?

To calculate Straight-Line Depreciation, you need to determine how much of the asset's cost will be recognized as an expense over each period of its useful life. The formula involves subtracting the asset's salvage value from its initial cost, which represents the total amount that can be depreciated. This difference, or depreciable base, is then divided by the number of years the asset is expected to be useful.

Using the correct method ensures that the asset's depreciation expense is evenly spread over its useful life, which helps in accurately matching the expense with the revenue generated by the asset during that time. Consequently, option B is correct because it accurately captures this process: it starts with the total cost, subtracts the salvage value (the estimated value at the end of its useful life), and divides it by the useful life in years to determine the annual depreciation expense. This results in a consistent and straightforward calculation in accounting practices.