How Do You Calculate Depreciation When There Is Residual Value?
Understanding depreciation is critical to business accounting. Nearly every business requires the acquisition of fixed assets, such as office or manufacturing equipment. Calculating depreciation represents allocation of the cost of an asset during the course of its useful life. Residual value, also known as salvage value, is the value that remains in the asset, once deprecation has begun. Several methods of calculating depreciation exist. Here, we will discuss the straight-line and declining-balance methods. Find out what the asset costs. If you were not responsible for the purchase, your accounting or purchasing departments should have the information. Find out what the useful life of the asset will be. Your accounting department or operations manager should be able to get you this data. Divide the cost of the asset by the useful life figure. The formula for the straight-line depreciation method is cost divided by useful life. Assuming the cost of the asset to be $25,000 and its expec
