ACCA Applied Knowledge · Financial Accounting · Disclosure notes
Ferris Co's machinery had a cost of $250,000 and accumulated depreciation of $100,000 at 1 January. It depreciates machinery at 20% per year on the reducing balance basis, and no assets were bought or sold in the year. What carrying amount is disclosed at 31 December?
The carrying amount is $120,000. The opening carrying amount is $150,000, and reducing balance depreciation at 20% of that figure is $30,000. Deducting it leaves $120,000. Applying 20% to cost instead would wrongly charge $50,000.
- A$120,000Correct
- B$150,000
- C$200,000
- D$130,000
Explanation
Opening carrying amount is 250,000 - 100,000 = 150,000. Depreciation for the year is 20% x 150,000 = 30,000. Closing carrying amount = 120,000. Using 20% of cost (50,000) would give 100,000, which is wrong.
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