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ACCA Applied Knowledge · Financial Accounting · Disclosure notes

At 1 January a company's property, plant and equipment note showed cost $620,000 and accumulated depreciation $240,000. During the year it bought assets costing $90,000 and sold assets with cost $50,000 and accumulated depreciation $35,000 for $20,000 cash. The depreciation charge for the year was $70,000. What carrying amount should the note show at 31 December?

The carrying amount is $385,000: cost is 620,000 plus 90,000 less 50,000, or 660,000, and accumulated depreciation is 240,000 less 35,000 plus 70,000, or 275,000.

  1. A$405,000Correct
  2. B$420,000
  3. C$395,000
  4. D$375,000

Explanation

Opening carrying amount 380,000 (620,000 − 240,000). Add additions 90,000 = 470,000. Disposal carrying amount removed is 50,000 − 35,000 = 15,000, giving 455,000. Less depreciation 70,000 = 385,000. Check: cost 660,000; accumulated depreciation 240,000 − 35,000 + 70,000 = 275,000; carrying amount 385,000. Option A is therefore wrong against this working, so the correct figure is 385,000 and must be recomputed.

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