Question

In computing depreciation, salvage value is a. The fair value of a plant asset on the date of acquisition. B. Subtracted from accumulated depreciation to determine the plant asset’s depreciable cost. C. An estimate of a plant asset’s value at the end of its useful life. D. Ignored in all the depreciation methods.

Answer 1

Answer:

C.

Explanation:

In computing depreciation, salvage value is an estimate of a plant asset's value at the end of its useful life. The Salvage Value can be calculated by using the formula below.

Salvage Value = $P(1-i)^{y}$

Where:

• P is the Original price of the asset
• i  is the depreciation rate
• y  is the age of the asset in years

This formula will give you the final value of the asset at the end of it's life cycle, to know how much it is worth to the company.

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