What is the formula for calculating depreciable value?

The formula for calculating depreciable value is fundamentally designed to determine the amount of an asset that can be depreciated over its useful life. It takes into account the total costs associated with acquiring and preparing the asset for its intended use, while also considering its estimated residual or salvage value at the end of its useful life.

The accurate approach involves summing the initial cost of the asset with any additional costs necessary to prepare the asset for use, such as transportation and installation. After this total, the salvage value—which is the estimated resale value of the asset at the end of its useful life—needs to be subtracted. This gives you the amount that will be subject to depreciation, which reflects the wear and tear, obsolescence, or reduction in value over time.

In contrast, the other options do not correctly represent this process. For example, including insurance and labor costs or repairs does not directly contribute to the initial cost of the asset usable for depreciation calculations. Similarly, multiplying the cost by the estimated useful life does not yield the depreciable value; instead, depreciation typically uses specific methods based on the depreciable amount. Thus, option B accurately captures the necessary components for calculating depreciable value by including the relevant costs and adjusting for the salvage value.