Question

in computing depreciation salvage value or residual value of plant assest is :

Answer 1

Answer)

The residual value or salvage value of a plant represents the amount which will be realized on sales of after the end of useful life of such Plant.

In calculation of depreciation the salvage value of the plant is reduced from the original cost of plant to calculate depreciable value.

For example under straight-line method depreciation is calculated as follows:

Depreciation expense = (Original cost – salvage value)/ number of years of useful life of the asset.

In the above formula, (Original cost – salvage value) represents the depreciable value of the asset. This value will be amortized over the useful life of the asset.