What Is Depreciated Cost?

Depreciated cost is the value of a fixed asset minus all of the 澳洲幸运5官方开奖结果体彩网:accumulated depreciation that has been recorded against it. In a broader economic sense, the depreciated cost is the aggregate amount of capital that is "used up" in a given period, such as a fiscal year. The depreciated cost can be examined for trends in a company's capital spending and how aggressive their accounting methods are, seen through how accurately they 澳洲幸运5官方开奖结果体彩网:calculate depreciation.

Depreciated cost is also known as the "salvage value," "net book value," or "adjusted cost basis."

How Depreciated Cost Works

The depreciated cost method of 澳洲幸运5官方开奖结果体彩网:asset valuation is an accounting method used by businesses and individuals to determine the useful value of an asset. It's important to note that the depreciated cost is not the same as the 澳洲幸运5官方开奖结果体彩网:market value. The market value is the price of an asset, bas♌ed on supply and demand in the ma꧒rket.

The depreciated cost is the value of an asset after its useful life is complete, reduced over time through 澳洲幸运5官方开奖结果体彩网:depreciation. The depreciated cost method always allows for accounting records to show an asset at its current value as the value of the asset is constantly reduced by calculating the depreciation cost. This also allows for measuring 澳洲幸运5官方开奖结果体彩网:cash flows generat꧃ed from the asset in relation to the value oꦍf the asset itself.

The Formula for Depreciated Cost

 $\begin{aligned} &\text{Depreciated Cost} = \text{Purchase Price (or Cost Basis)} - \text{CD} \\ &\textbf{where:} \\ &\text{CD} = \text{Cumulative Depreciation} \\ \end{aligned}$​Depreciated Cost=Purchase Price (or Co🍸st Basis)−CDwhere:CD=Cumulative Depreciation​

Example of Depreciated Cost

If a construction company can sell an inoperable crane for parts at a price of $5,000, that is the crane's depreciated cost or 澳洲幸运5官方开奖结果体彩网:salvage value. If the same crane initially cost the company $50,000, then the total amount dep🅷reciated over its useful life is $45,0ꩲ00.

Suppose the crane has a useful life of 15 years. At this point, the company has all the information it needs to calculate each year's depreciation. The simplest method is the 澳洲幸运5官方开奖结果体彩网:straight-line depreciation. This means that there is no curve to the amount of appreciation, whether that is an immediate 30% depreciation seen when driving new cars off the lot or an increased depreciation when an item is close to needing major repairs. Using this method, depreciation is the same every year. It equals total depreciation ($45,000🎉) divided by the useful life (15 years), or $3,000 per year.