How is the Straight-Line Depreciation Method calculated?

The Straight-Line Depreciation Method is calculated by taking the original cost of an asset, subtracting its salvage value (the estimated residual value at the end of its useful life), and then dividing that amount by the useful life of the asset. This method spreads the cost of the asset evenly over its useful life, reflecting a consistent reduction in value each year.

This approach is straightforward and commonly used because it aligns the expense recognition with the revenue generated from the asset over time, allowing for simplified accounting. By using this method, businesses can systematically allocate costs, which helps in budgeting, forecasting, and financial reporting.

The other options do not accurately reflect the calculation of straight-line depreciation. For instance, dividing cost by annual income does not account for the asset's useful life or salvage value. Temporary life expectancy is not a standard term used in depreciation calculations. Similarly, using net profit divided by asset value does not relate to the depreciation formula at all. Hence, the correct calculation method focuses on cost, salvage value, and useful life, which aligns perfectly with option B.