ACCA FA · Chapter 6 · Question 4 of 12
A vehicle costing $20,000 is depreciated at 25% per year on the reducing balance basis, with a full year's charge in the year of purchase. What is its carrying amount at the end of its third year, to the nearest $?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) $8,438
Explanation
Year 1: $20,000 x 75% = $15,000. Year 2: $15,000 x 75% = $11,250. Year 3: $11,250 x 75% = $8,437.50, which rounds to $8,438. Straight-line at 25% of cost would give $5,000, $11,250 is the carrying amount after two years, and $6,328 is after four years.
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