An easy way to make a depreciation schedule is to enter the information into a spreadsheet.

When you do not have access to a spreadsheet, you can use a scientific calculator to find the annual depreciation by the straight-line method. Try using these steps.

1. Subtract the salvage value from the purchase price.
2. Divide by the years of useful life.
3. Round to the nearest cent.

In Example 2, it was noted that in straight-line depreciation the same amount is expensed each year. Graphically, this creates a linear pattern, hence the name "straight-line depreciation." The figures below illustrate the linear pattern.

Have you ever wondered what life on the farm is like? Check out Window on the Prairie to get a bird's eye view of what it's like to live on a farm. You can even view pictures from the inside of a wheat combine and see what a farmer sees as he harvests wheat.

According to the depreciation schedule spreadsheet shown in Example 2, after five years, the combine was worth $175,000. If he sells it for $180,000, he should report the $5000 difference on his tax return. It will be taxed like regular income by the Internal Revenue Service. Taxing the difference on something sold for higher than its depreciated value is called depreciation recapture.