Calculate replacement cost by subtracting the accumulated depreciation from the asset value listed on the balance sheet. When reviewing a company’s balance sheet, you can detect which assets may soon require replacement by looking for assets with a high accumulated depreciation. For journal entries, use a substitution approach. For example, a manufacturing company replaces some machinery for $120,000. The net book value of these assets is $15,000, which is the net value minus the accumulated depreciation of the old assets ($120,000 - $105,000).