The book value in the units-of-production method should never go below the residual value.

Question

Quizplus · Accepted Answer

The book value is calculated by deducting the accumulated depreciation from the cost of the asset. It is possible for the book value to go below the residual value if the asset has been heavily depreciated or impaired. However, in the units-of-production method, the depreciation is based on usage rather than time, which makes it less likely for the book value to drop below the residual value. Therefore, the statement is true.

The Book Value in the Units-Of-Production Method Should Never Go