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Equipment costs $27,000 with a $900 residual value and a three-year life, depreciated straight-line from 1 January 2012. What is the carrying amount at 31 December 2013?
A$18,300
B$9,600
C$10,500
D$900
Answer & Solution
Correct answer: B. $9,600
1. Annual straight-line charge $= (\$27{,}000 - \$900) \div 3 = \$8{,}700$.
2. By 31 Dec 2013 two full years have elapsed (2012 and 2013).
3. Accumulated depreciation $= 2 \times \$8{,}700 = \$17{,}400$.
4. Carrying amount $= \$27{,}000 - \$17{,}400 = \$9{,}600$.
5. Option A is the carrying amount after only one year; D is after three years.
_Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §4.5.2 "Straight-Line Method", p.153_
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