3.6 : 減価償却：定額法

The Straight-Line Method of depreciation assumes an asset loses value at a constant rate over its useful life until it reaches its scrap value, also known as its salvage value.

The method is used for buildings, vehicles, and other long-lived assets.

For calculating depreciation, the initial cost of the asset, its estimated useful life, and the scrap value at the end of its life are required.

The formula is calculated to reflect a steady and predictable decline in the asset's useful life.

Let us consider that Paramount purchases a machine for fifty thousand dollars, having an estimated useful life of five years and a scrap value of five thousand dollars at the end of its period.

The annual depreciation expense on the machine is calculated as nine thousand dollars per year.

It means that, according to Paramount's balance sheet, the machine's value will decline at a constant rate over the next five years.

Though this method simplifies the calculation of depreciation, it ignores the usage of the machine and its potential increased repair expenses.