If an asset costs $10,000 and accumulated depreciation is $3,000, what is its net book value?

• A. $7,000
• B. $13,000
• C. $3,000
• D. $10,000

Answer: (A)

Net book value is what the asset is currently worth on the books after accounting for depreciation. It is found by subtracting accumulated depreciation from the asset’s cost. Here, the asset cost $10,000 and $3,000 has been depreciated, so $10,000 minus $3,000 equals $7,000. That is the value the asset carries on the balance sheet.

The other numbers aren’t correct for net book value: adding depreciation to cost would not reflect how depreciation works, and $3,000 is the amount that’s been expensed as depreciation, not the remaining value. The original cost, $10,000, is the amount before depreciation is deducted.