The first time the system calculates the book value of an asset, it calculates based on the following equation:
Book Value = Original Value - Periodic Depreciation Expense
For all subsequent book value calculations of the asset, the system uses the following equation:
Book Value = Book Value from Previous Period - Periodic Depreciation Expense
Example
See the following information to determine an asset's book value at the end of the 2003, 2004, and 2005:
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The Original Value of the asset is 10,000 USD.
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The depreciation expense for 2003 is 1,073.60 USD. The depreciation expense for 2004 is 6,441.60 USD. The depreciation expense for 2005 is 35.20 USD as taken from the example in "Calculating Periodic Depreciation Expense" earlier in this section.
To determine the asset's book value at the end of 2003, the system performs the following calculation:
2003 Book Value = Original value - 2003 Periodic Depreciation Expense
Book Value = 10,000 USD - 1073.60 USD
Book Value = 8,926.40 USD
To determine the asset's book value at the end of 2004, the system performs the following calculation:
2004 Book Value = 2003 Book Value - 2004 Periodic Depreciation Expense
Book Value = 8,926.40 USD - 6,441.60 USD
Book Value = 2,484.80 USD
To determine the asset's book value at the end of 2005, the system performs the following calculation:
2005 Book Value = 2004 Book Value - 2005 Periodic Depreciation Expense
Book Value = 2,484.80 USD - 35.20 USD
Book Value = 2,449.60 USD