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Explanation:
Salvage Value is the estimated resale value of an asset at the end of its useful life. Otherwise called as Scrape/Residual/Disposal/Terminal value. The Salvage Value is deducted from the cost of the asset in order to determine the total amount of depreciation expense that will be reported during the asset’s useful life.
Statement Formation:
I wonder if there was some Salvage Value left in the item and we could somehow still get a profit out of it.
Eg,depreciation is calculated on straight line basis.the cost of the asset is 5000 and salvage value is 1000 the estimated life of the asset is 800(5000-1000/5)
Salvage values are important in business because they affect the size of a company’s depreciation expense (and thus they affect net income). Salvage values are merely estimated because nobody knows what an asset will be worth after n number of years in advance as it is affected by the factors like technology, wear and tear, usage etc.
Salvage value is an estimated amount that is expected to be received at the end of plant assets useful life.
Salvage value is sometime referred to as disposal value, terminal value or scrap value
Salvage value, also called scrap value, is the value of an asset after it has come to the end of its useful life.
For example..
let’s assume you buy a car for $20,000. You believe that the car could last for 15 years. After that, the car is probably “run into the ground” and its next stop is the junkyard. The salvage value of the car is the price a junkyard or recycler might pay you for the old, nonworking car.
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