Final answer:
To find the book value using the straight-line method, subtract the Accumulated Depreciation from the Cost. Example: An asset with an original cost of $200,000 and $85,000 in accumulated depreciation will have a book value of $115,000. Option A) Book value = Cost - Accumulated Depreciation is the correct answer.
Step-by-step explanation:
To find the book value of an asset using the straight-line method in accounting, you would use the formula: Book value = Cost - Accumulated Depreciation. Therefore, the correct option is A) Book value = Cost - Accumulated Depreciation. The Cost represents the original price of the asset when it was purchased. Accumulated Depreciation is the total amount of depreciation that has been expensed against the asset since the time it was purchased. Over time, as the asset depreciates, the book value decreases because the amount of accumulated depreciation increases.
For example, if a company buys a piece of equipment for $200,000 and the accumulated depreciation after five years is $85,000, then the book value of the equipment at that time would be $200,000 - $85,000 = $115,000. It's important to note that the accounting profit, or net income, of a business is calculated by subtracting explicit costs from total revenues. However, this is distinct from the concept of book value. The book value of an asset is concerned with the value of that specific asset on the company's balance sheet, rather than the profitability of the company as a whole.