Book Value Greater Than Salvage Value

Impairment is a situation where the market value of an asset is less than its net book value in which case the accountant writes down the remaining net book value of the asset to its market value.

Book value greater than salvage value. It is possible to get the price per book value by dividing the market price of a company s shares by its book value per share. The book value of a company is the amount of owner s or stockholders equity. Salvage value or scrap value is the estimated value of an asset after its useful life is over and therefore cannot be used for its original purpose.

The book value of an asset is the amount of cost in its asset account less the accumulated depreciation applicable to the asset. Calculatingdepreciation when salvage value exceeds net book value nbv there are instances when the residual value salvagevalue of an asset may increase to an amount equal to or greater thanthe asset s carrying amount nbv. Note that the book value of the asset can never dip below the salvage value even if the calculated expense that year is large enough to put it below this value.

Net book value from above 1 338 750 at the end of five years salvage value 1 600 000 sale price of asset at the end of five years gain salvage nbv 261 250 taxable gain on disposal gains tax 35 profit 91 438 the tax treament of capital gains may apply here this is one assumption that can be used net proceeds gain tax 169 813 that is capital gains are taxed at ordinary income rates it. At the end of its useful life the net book value of an asset should approximately equal its salvage value. In the example above the asset s book value after 6 years would be 10 000 6000 or 4000.

If the sales price is greater than the asset s book value the company shows a gain. By comparing an asset s book value cost less accumulated depreciation with its selling price or net amount realized if there are selling expenses the company may show either a gain or loss. The liquidation value is the value of a company s real estate fixtures equipment and inventory.

Liquidation value is usually. For example if the machinery of a company has a life of 5 years and at the end of 5 years its value is only 5000 then 5000 is the salvage value. In depreciation the residual value is the estimated scrap or salvage value at the end of the asset s useful life.