Which asset value do I have to use to calculate depreciation?
I was wondering which value of an asset do I have to use to calculate depreciation, the market value or the original value? For example:
I buy a 20 thousand car with an expected service life of 5 years, the first year's depreciation is 4 thousand dollars.
The second-year the car's market value is 18 thousand instead of 20 thousand, so the depreciation would be 4 thousand dollars (using the original asset's price), or 3.6 thousand dollars (using the present asset's market price)?