The SLN function in Excel is used to calculate the straight-line depreciation of an asset for a single period. With straight-line depreciation, the asset’s value is reduced uniformly over its useful life.
Here’s how to use the SLN function:
Function Syntax:
SLN(cost, salvage, life)
Parameters:
- 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 or residual value).
- life: The useful life of the asset (number of periods, typically years).
Steps to Use SLN Function:
=SLN(10000, 1000, 5)
- Identify the Required Values:
- Cost: Determine the initial purchase price or cost of the asset.
- Salvage Value: Estimate the expected value at the end of its useful life.
- Life: Estimate how long the asset will be useful (in periods).
- Enter the Formula:
- Click on the cell where you want the depreciation result to appear.
- Enter the formula with the parameters. For example:
- This formula assumes the asset costs $10,000, has a salvage value of $1,000, and a useful life of 5 periods (years).
- Press Enter:
- After typing the formula, press `Enter` to calculate the depreciation for one period.
Example Usage:
Suppose a company buys a piece of equipment for $10,000, expects it to last 5 years, and projects it could sell it for $1,000 at the end of its life.
Here, the SLN formula in Excel would look like:
=SLN(10000, 1000, 5)
This would return $1,800 per year as the straight-line depreciation expense.
Tips:
- Ensure that the cost, salvage value, and life are entered accurately to get the correct depreciation value.
- Straight-line depreciation is the simplest and often the most straightforward method to apply, especially for assets with consistent utility over their life.
By following the above instructions, you should be able to effectively calculate straight-line depreciation using the SLN function in Excel.
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