On 1 January Hobby Co (functional currency $) bought a machine for 600,000 kroner when the exchange rate was 6 kroner = $1, and paid for it immediately. The machine is depreciated over 10 years on a straight-line basis. At 31 December the rate was 5 kroner = $1. What is the machine's carrying amount at 31 December?

Correct answer: B) $90,000

Explanation

Property, plant and equipment is non-monetary. Under the cost model it is recorded at the spot rate on the transaction date and not retranslated: 600,000 / 6 = $100,000. Depreciation = $100,000 / 10 = $10,000. Carrying amount = $100,000 - $10,000 = $90,000. The closing rate is irrelevant because the cash was paid on the purchase date.