VALUER WORLD

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# MEANING OF SCRAP AND SALVAGE VALUE

Value is nothing but the worth or utility of certain building, property, machinery, equipment, etc. Value always changes from time to time and always depend upon supply and demand. The value of the property within short time may be more than its existing worth or price. There are many types of values which are used while Estimating and Costing of certain thing.

SCRAP VALUE:

Scrap value is the worth of a physical asset’s individual components when the asset itself is deemed no longer usable. The individual components, known as scrap, are worth something if they can be put to other uses. Sometimes scrap materials can be used as-is and other times they must be processed before they can be reused. An item’s scrap value—also called residual value, break-up value, or salvage value—is determined by the supply and demand for the materials it can be broken down into. Scrap value is the worth of a physical asset’s individual components when the asset itself is deemed no longer usable. After a long-term asset—such as machinery, vehicle, or furniture—has gone through its useful life, it may be disposed of. Scrap value is also known as residual value, salvage value, or break-up value.

Formula and Calculating of Scrap Value

Scrap Value = Cost of Asset−(D×Useful Life)

where: D = Depreciation

SALVAGE VALUE:

Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important component in the calculation of a depreciation schedule. Salvage value is the book value of an asset after all depreciation has been fully expensed. The salvage value of an asset is based on what a company expects to receive in exchange for selling or parting out the asset at the end of its useful life. Salvage value will influence the total depreciable amount a company uses in its depreciation schedule.

Formula and Calculating of Salvage Value

S = P – (I * Y)

Where,

• S = Salvage Value
• P = Original Price
• I = Depreciation
• Y = Number of Years
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