Annual depreciation is calculated by dividing which of the following?

Annual depreciation is calculated by dividing the replacement cost by the expected life. This method reflects how much value a vehicle loses each year based on its original value when new and its projected lifespan or functional use. The replacement cost represents what it would take to replace the vehicle with a new one of similar make, model, and functionality, while the expected life accounts for how long the vehicle is anticipated to provide useful service before it either becomes too costly to maintain or reaches the end of its functional utility.

This approach allows for a systematic allocation of the vehicle's cost over its useful life, which is essential for accurate valuation in insurance claims, financial reporting, and asset management. By using replacement cost and expected life, appraisers can give a clearer picture of the asset's value as it diminishes over time, representing wear and tear, market conditions, and technological obsolescence.