Historical Cost (Vehicle) - Accumulated Depreciation = Select ALL correct optionsResale Value1Residual Value2Book Value3Carrying Amount
Question
Historical Cost (Vehicle) - Accumulated Depreciation = Select ALL correct optionsResale Value1Residual Value2Book Value3Carrying Amount
Solution
The correct options are:
- Residual Value
- Book Value
- Carrying Amount
Here's why:
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Historical Cost (Vehicle) - This is the original cost of the vehicle when it was first acquired.
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Accumulated Depreciation - This is the total depreciation that has been charged against the vehicle over its life.
When you subtract the Accumulated Depreciation from the Historical Cost, you get the current value of the vehicle according to the books. This is known as:
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Residual Value - This is the estimated value of an asset at the end of its useful life. In other words, it's what you expect to be able to sell the vehicle for when you're done using it.
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Book Value - This is the value of an asset according to the balance sheet, which is calculated as the Historical Cost minus Accumulated Depreciation.
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Carrying Amount - This is another term for Book Value. It's called the "carrying amount" because this is the value that you "carry" forward into the next accounting period.
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Resale Value - This is not necessarily correct because the resale value is the amount you could currently get if you sold the vehicle, which may be different from the book value or carrying amount. The resale value can be influenced by a variety of factors including market conditions, the condition of the vehicle, and more.
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