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)?

2 Answers

  • Eva
    Lv 7
    1 month ago
    Favorite Answer

    You always use the original value. Market value doesn't enter into it.

    • Login to reply the answers
  • 1 month ago

    Original cost less salvage value for straight line depreciation.

    • Login to reply the answers
Still have questions? Get your answers by asking now.