30 Mar Answered: 30 The book value of a plant asset is

We also can compute the straight-line depreciation rate, defined as 100% divided by the number of periods in the asset’s useful life. For the inspection machine, this rate is 20% (100% ÷ 5 years, or 1/5 per period). We use this rate, along with other information, to compute the machine’s straight-line depreciation schedule shown in Exhibit 10.8. First, the book value of a plant asset is defined as: depreciation expense is the same each period. Second, accumulated depreciation is the sum of current and prior periods’ depreciation expense. Third, book value declines each period until it equals salvage value at the end of the machine’s useful life. Plant assets usually generate value for the company over a duration of more than one year.

When compared to the company’s market value, book value can indicate whether a stock is under- or overpriced. Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance. Adam received his master’s in economics from The New School for Social Research and his Ph.D. from the University of Wisconsin-Madison in sociology. He is a CFA charterholder as well as holding FINRA Series 7, 55 & 63 licenses. He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem.

Types of Plant Assets

Thus, book value can be equated with accounting value. In general, it is the value of a piece of equipment or other property after it has been functionally rendered useless for the purpose for which it was intended.

Depreciation is an expense, which is shown in the business profit and loss statement. Depreciation effectively lowers profits, thereby reducing business taxes. Book value per share is a method to calculate the per-share book value of a company based on common shareholders’ equity in the company.

The net book value of the plant asset at the start of the year is P480,000. The depreciation rate…

The discarding of a plant asset is disposing of an asset in exchange for no cash but on the other hand selling of a plant is disposing of an asset in exchange for cash. https://simple-accounting.org/ Datarails is an enhanced data management tool that can help your team create and monitor cash flow against budgets faster and more accurately than ever before.

An impairment in accounting is a permanent reduction in the value of an asset to less than its carrying value. A P/B ratio of 1.0 indicates that the market price of a company’s shares is exactly equal to its book value. For value investors, this may signal a good buy since the market price of a company generally carries some premium over book value. It serves as the total value of the company’s assets that shareholders would theoretically receive if a company was liquidated. C) the difference between the cash received on sale and the book value of the equipment. The difference between the cash received on sale and the book value of the equipment.