Residual Value

Residual value is value of an asset at the end of its useful life. A synonym of residual value is salvage value.

Example:

Adequate Disclosure purchases a car for $100,000 with a salvage value of 10 years. Depreciation for year one is $9,000. What is the residual value?

Step 1: First use the depreciation formula

$100,000 – (Residual Value/Salvage Value) / 10 years = $9,000

Step 2: Calculate the residual value

$100,000 – $10,000/10 = $9,000