Question
A machine has a carrying amount of $90,000 at January 1, 2028. Management determines that the pattern of consumption is now better reflected by the diminishing-balance method rather than straight-line. The machine's remaining useful life is 5 years and its residual value is $10,000. The applicable diminishing-balance rate is 30%.
Required: Determine 2028 depreciation.
Statements in this challenge
- Classify the ChangeMCQ Quiz
- AnswerNumeric Answer
Scoring
- 40% Account naming / line matching
- 40% Amount correctness
- 20% Structure / section placement
IAS 16 — Property, Plant and Equipment
Depreciation spreads the depreciable amount — cost less residual value — over the asset's useful life. Establish the depreciable amount, the method and the period of ownership within the year before computing anything; a mid-year acquisition or disposal is charged only for the months held.
Common mistakes
- Deducting residual value under the reducing-balance method, where the rate applies to carrying amount instead.
- Charging a full year on an asset bought or sold part-way through the period.
- Continuing to depreciate an asset once its carrying amount has reached residual value.
Further readingStraight-line depreciation, worked