What should you do? Consider the following items in your answer: First off what the directorwants to do is a direct violation of the matching principles for accounting. You are there to keep the books in balance and follow the guidelines set forth by the GAAP. Therefore you can’t lie about how the numbers add up. What is a residual value? How is it determined? Why is it subtracted from cost before depreciation expense is calculated?The residual value is the amount of money a company expects to realize from selling an asset when it is no longer needed. The residual value amount is determined by the company’s previous sales and what they think the future market value would be (p. 412). The residual value is not depreciated because at the end of the asset’s useful life the company will recover from the costs. The balance should be equal when it comes to the buying price and the amount at the end of its life cycle.