The SLN function in Excel is used to calculate the straight-line depreciation of an asset for one period. This method of depreciation spreads the cost of the asset evenly over its useful life. The SLN function is useful in financial accounting to determine how much of the asset's value is depreciated each year, which can be crucial for budgeting and tax purposes.
Syntax
| Formula | Description |
|---|---|
| =SLN(cost, salvage, life) | Calculates the straight-line depreciation of an asset for one period. |
- cost: The initial cost of the asset.
- salvage: The value of the asset at the end of its useful life (also known as the salvage value).
- life: The number of periods (typically years) over which the asset is depreciated.
Example
Let’s consider a scenario where a company purchases a piece of equipment for $50,000. The equipment has a salvage value of $5,000 and is expected to last for 10 years. We will calculate the annual straight-line depreciation.
| Input | Value |
|---|---|
| Cost of Asset (cost) | $50,000 |
| Salvage Value (salvage) | $5,000 |
| Useful Life (life) | 10 years |
To calculate the annual depreciation, use the following formula:
=SLN(50000, 5000, 10)This will give you the amount of depreciation that should be recorded each year over the asset’s useful life.
Practice Exercise 1
Task: Calculate the annual straight-line depreciation for a delivery truck purchased for $75,000. The truck has a salvage value of $10,000 and is expected to be used for 8 years.
Hint: Remember to subtract the salvage value from the initial cost before dividing by the useful life to find the annual depreciation.
Practice Exercise 2
Task: Calculate the annual straight-line depreciation for a building purchased for $500,000. The building has a salvage value of $50,000 and a useful life of 25 years.
Hint: Use the SLN function to calculate the depreciation amount by inputting the cost, salvage value, and useful life.
Solution for Exercise 1:
=SLN(75000, 10000, 8)Explanation: This formula calculates the annual straight-line depreciation for the delivery truck. The depreciation amount each year is $8,125, which is the difference between the initial cost and the salvage value, divided by the useful life of the truck.
Solution for Exercise 2:
=SLN(500000, 50000, 25)Explanation: This formula calculates the annual straight-line depreciation for the building. The depreciation amount each year is $18,000, which is calculated by subtracting the salvage value from the initial cost and dividing by the useful life of the building.