ICAEW AF · Chapter 11 · Question 4 of 13
A machine costing £32,000 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?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) £13,500
Explanation
Year 1: £32,000 x 75% = £24,000. Year 2: £24,000 x 75% = £18,000. Year 3: depreciation £18,000 x 25% = £4,500, leaving a carrying amount of £13,500. Applying 25% to cost each year (straight line) would give £8,000.
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