Correct Answer - Option 4 : Scrap value
Concepts:
The sinking fund method is a technique for depreciating an asset while generating enough money to replace it at the end of its useful life. As depreciation charges are incurred to reflect the asset's falling value, a matching amount of cash is invested. These funds sit in a sinking fund account and generate interest.
The calculation of the sinking fund depends on the life of the building and the scrap value of the building.
Salvage value is the estimated resale value of an asset at the end of its useful life. It is subtracted from the cost of a fixed asset to determine the amount of the asset cost that will be depreciated. Thus, salvage value is used as a component of the depreciation calculation.
Scrap value is the worth of a physical asset's individual components when the asset itself is deemed no longer usable.
