What is the formula for calculating the straight-line depreciation if the economic life is given?

The formula for calculating straight-line depreciation involves determining the amount of depreciation expense that will be allocated evenly over each year of an asset's useful economic life. The correct approach is to subtract the residual value of the asset from its initial cost and then divide that amount by the useful economic life of the asset. This represents the portion of the asset's cost that is to be expensed each year based on its anticipated usage and value at the end of its useful life.

In this context, the calculation captures the essence of depreciation, which is the systematic allocation of the cost of an asset over the period it is used in business operations. The residual value represents the expected value of the asset at the end of its useful life, and correctly removing this value from the total cost before distributing the result over the years accounts for the value retained in the asset.

The other formulas do not accurately represent the straight-line depreciation method. For example, adding instead of subtracting the residual value or involving it in a different way does not align with the principles of how depreciation is calculated. By focusing on the difference between the initial cost and the residual value, while spreading that amount over the estimated useful life, we capture the essence of how straight-line depreciation is designed to function.