What is the book value of a plant asset?

The book value of a plant asset is calculated by taking the original cost of the asset and subtracting accumulated depreciation. This represents the value of the asset on the company's balance sheet and reflects the portion of the asset that has not yet been expensed through depreciation.

Accumulated depreciation accounts for the total amount of the asset's cost that has been expensed over time as it is used in operations. As the asset ages and is utilized, its book value decreases, providing a more accurate representation of the asset's worth to the business at a given point in time.

In contrast, original cost plus new improvements would not give the book value because it does not account for the depreciation that has occurred. Estimated market value refers to how much the asset could be sold for on the market, which does not directly correlate with its book value. Replacement cost indicates how much it would cost to replace the asset, which can differ significantly from its book value. Both of these measures do not reflect the historical cost basis and the effects of depreciation that are central to calculating book value.