PRC-1 · Chapter 6 · Question 57 of 100
An entity purchased a machine for Rs. 20 million with a 6-year useful life in 2019. Which of the following represents the conceptually correct estimation of its 'residual value' at the date of purchase?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) Rs. 4 million that could currently be obtained from disposing of a similar 6-year-old machine in its present condition.
Explanation
Residual value is estimated using current prices. It is the estimated amount the entity would currently obtain from disposal if the asset were already of the age and in the condition expected at the end of its useful life.
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