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Furniture and fixtures, equipment and leasehold improvements are stated at cost. Depreciation of furniture and fixtures and equipment is computed using the straight-line method over estimated useful lives that range from two to ten years. Leasehold improvements are amortized using the straight-line method over the shorter of their estimated useful lives or the term of the related leases.
Each year of the useful life of the asset, a specific amount can be included in the business's income tax return as an expense, thus reducing the business taxable income. As an example, office furniture is purchased by a business for $20,000. The furniture has a useful life of 10 years and a scrap value of $1000. Using straight-line depreciation (described below), the $19,000 of the cost of the furniture is divided over the 10 years of life, so $1,900 can be deducted on the business's tax return for each of the 10 years.