What is Depreciated Book Value and Its Legal Implications?
Definition & Meaning
Depreciated book value refers to the value of personal property after accounting for depreciation. It is calculated by taking the original cost of the property, including installation expenses, and subtracting the accumulated depreciation recorded in the company's financial books. This value also considers a reasonable allowance for obsolescence, reflecting the decrease in value over time due to wear and tear or technological advancements.
Legal Use & context
This term is commonly used in accounting, taxation, and financial reporting. It is particularly relevant in legal contexts involving asset valuation, such as in divorce settlements, business valuations, or bankruptcy proceedings. Users may handle related forms and procedures through resources like US Legal Forms, which provide templates drafted by legal professionals.
Real-world examples
Here are a couple of examples of abatement:
For instance, if a company purchases a machine for $50,000 and records $10,000 in depreciation over five years, the depreciated book value would be $40,000. This value is important for determining the asset's worth in financial statements or during a sale.
(Hypothetical example) A business acquires a vehicle for $30,000, incurs $5,000 in installation costs, and depreciates it by $15,000 over its useful life. The depreciated book value would be $20,000.