How is the depreciable base calculated?

The depreciable base is a crucial calculation in the accounting process of depreciation. It represents the amount that can be depreciated over the useful life of an asset. To find this value, you start with the acquisition cost of the asset, which includes all costs incurred to get the asset ready for use, such as purchase price, shipping, and installation.

From this acquisition cost, you subtract the residual value, which is the estimated value that the asset will have at the end of its useful life. The residual value is what the company expects to receive from the asset once it is no longer useful for its intended purpose.

By taking the acquisition cost and deducing the residual value, you arrive at the depreciable base, which effectively represents the total cost that can be allocated to expense over the asset’s lifespan through depreciation.

Therefore, the calculation of the depreciable base using acquisition cost minus residual value is the correct method to determine how much of the asset's cost will be allocated for depreciation expense.