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how is net book value calculated. The calculation of book value for an asset is the original cost of the asset minus the accumulated depreciation where accumulated depreciation is the average annual depreciation multiplied by the age of the asset in years. Formula for Net Book Value Net Book Value Cost of the Asset Accumulated Depreciation Significance of Net Book Value.
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The net book value of an asset is calculated by deducting the depreciation and amortization of an asset from its original cost. The original cost of an asset is the acquisition cost of the asset which is the cost required to not only purchase or construct the asset but also to bring it to the location and condition intended for it by management. How Book Value of Assets Works.
Over time assets lose some of their value.
Book value is equal to the cost of carrying an asset on a companys balance sheet and firms calculate it netting the asset against its accumulated depreciation. Formula to Calculate Book Value of a Company. The formula to calculate net book value is. Net book value is defined as the carrying value of the asset on the balance sheet of the company and is calculated as the original cost of the asset less the accumulated depreciation accumulated amortization accumulated depletion or accumulated impairment.
