Final answer:
Residual value is not depreciated as it is expected to be recovered at the end of an asset's useful life.
Step-by-step explanation:
The statement is true
Residual value is not depreciated because it represents the estimated value of an asset at the end of its useful life, and it is expected to be recovered or realized when the asset is disposed of or no longer in use. In the context of depreciation, the residual value is subtracted from the initial cost of the asset to determine the depreciable base. The depreciable base is then used to calculate depreciation over the asset's useful life.
The idea is that depreciation allocates the cost of an asset over its useful life, but it does not reduce the asset's value below its anticipated residual value. Therefore, the residual value is not subject to depreciation because it is considered the expected value that will remain in the asset at the end of its useful life.
Residual value, also known as salvage value or scrap value, refers to the estimated worth of an asset at the end of its useful life. It represents the amount that can be recovered by selling the asset or the remaining value that can be used for other purposes.
Since the residual value is expected to be recovered, it is not subject to depreciation. Depreciation refers to the systematic allocation of an asset's cost over its useful life, aiming to reflect its decreasing value and wear and tear.