At the beginning of a financial year, a business acquired equipment at a cost of

Q: At the beginning of a financial year, a business acquired equipment at a cost of

3. R144,000 Depreciation per year = (R300,000 - R40,000) / 5 = R52,000 Depreciation for 3 years = R52,000 × 3 = R156,000 Carrying amount of equipment at the end of the third financial year = R300,000 - R156,000 = R144,000

ID: 2330459 • Letter: A

Question

At the beginning of a financial year, a business acquired equipment at a cost of R300 000 with an expected useful life of 5 years. The expected residual value at the end of the useful life of the equipment is R40 000. The business applies the straight line method to calculate the depreciation on equipment. Which one of the following alternatives represents the carrying amount of equipment at the end of the third financial year after the purchase of the equipment?
1. R104 000
2. R120 000
3. R144 000
4. R173 120

Explanation / Answer

3. R144,000

Depreciation per year = (R300,000 - R40,000) / 5 = R52,000

Depreciation for 3 years = R52,000 × 3 = R156,000

Carrying amount of equipment at the end of the third financial year = R300,000 - R156,000 = R144,000

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