What is the formula for calculating book value of a fixed asset?

The book value of a fixed asset is calculated using the formula that represents the original cost of the asset, adjusted for the amount of depreciation that has been accumulated over time. This approach provides a clear understanding of how much value the asset has lost due to wear and tear or obsolescence.

By subtracting accumulated depreciation from the cost of the asset, you arrive at the book value, which reflects the net value of the asset as recorded in the financial statements. This calculation is important for accounting purposes as it informs investors, stakeholders, and management of the current value of fixed assets that the business holds on its books.

The other options do not accurately reflect the standard method for calculating book value. The first option incorrectly adds accumulated depreciation instead of deducting it, while the third option involves market value and liabilities, which are not part of calculating book value. The fourth option focuses on replacement cost, which is also distinct from calculating book value, as it does not factor in the original cost and accumulated depreciation in the correct manner.