Book Value After Depreciation

The useful life is 20 years and the salvage value is 1 000 so the depreciation for each year is 2 450 50 000 1 000 divided by 20.

Book value after depreciation. While small assets are simply held on the books at cost larger assets like buildings and equipment must be depreciated over time. Net book value 200 000 60 000 140 000. Take an asset that has a value of 50 000.

Book value also carrying value is an accounting term used to account for the effect of depreciation on an asset. The book value of an asset is how it s shown on the business balance sheet. Net book value is among the most popular financial metrics around.

Each year the book value changes because some of the value has already been depreciated. In our example the nbv of the logging company s truck after four years would be 140 000. The use of the deprecation formula is to spread the cost of the asset over its useful life thereby reducing the huge expense burden in a single year.

Book value is equal to the cost of carrying an asset on a company s balance sheet and firms calculate it netting the asset against its accumulated depreciation. Book value of business assets. As a result book value can also be.

The truck mentioned earlier may have a book value of 45 000 after one year but if the company chose to sell it it might get only 35 000. Depreciation expense is an indirect expense and important accounting procedure for an organization to estimate the book value of an asset after its usage during the accounting period. Then as time goes on the cost stays the same but the accumulated depreciation increases so the book value decreases.

Accumulated depreciation 15 000 x 4 years 60 000. A fixed asset is fully depreciated when its original recorded cost less any salvage value matches its total accumulated depreciation. A business should detail all of the information you need to calculate book value on its balance sheet.