What is the salvage value in the context of straight-line depreciation?

In the context of straight-line depreciation, the salvage value refers to the estimated value of an asset at the end of its useful life. This value represents how much the asset is expected to be worth after it has been fully depreciated and is no longer in use for its intended purpose.

In straight-line depreciation, the total cost of the asset is divided evenly over its useful life, taking into account the salvage value. This means that the initial investment is recaptured through depreciation expenses over time, ultimately leading to a residual value that reflects the amount that can potentially be recovered or realized upon disposal of the asset.

While other considerations such as the initial cost or market value of the asset may come into play when assessing its financial impact, the salvage value specifically pertains to how much the asset is valued at the conclusion of its useful life in accounting terms. This is crucial for accurately calculating depreciation and understanding the asset's remaining worth at the end of its service period.