HRH 's balance sheet of 30 June 2014 shows a motor vehicle at a cost price of $56 000 less accumulated depreciation of $28 000. Depreciation is calculated on a straight-line basis. If the vehicle had a useful life of 6 years at the time of purchase and a residual value of $8000 what is its carrying amount on 1 July 2016?

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Quizplus · Accepted Answer

The carrying amount on 1 July 2016 would be $12,000. This is calculated by first determining the annual depreciation, which is ($56,000 - $8,000) / 6 = $8,000 per year. By 30 June 2014, after 2 years, the accumulated depreciation is $28,000, indicating that the depreciation expense was higher than the straight-line basis calculation, possibly due to an initial error or adjustment. However, following the given information for a straight-line basis, two more years of depreciation (for the years ending 30 June 2015 and 30 June 2016) would be $16,000 ($8,000 per year x 2). Subtracting this from the initial cost ($56,000 - $16,000) gives a carrying amount of $40,000 by 30 June 2016. However, considering the accumulated depreciation already accounted for ($28,000 for 2 years), and if we were to correct the approach to align with the straight-line basis provided, the depreciation should indeed total $24,000 ($8,000 x 3 years) by 30 June 2016, not $16,000 over two years as previously calculated. This discrepancy suggests a misunderstanding in the calculation. Given the options and the scenario described, none directly align with the calculated values based on the provided depreciation method and life span, indicating a need to reevaluate the answer based on the given choices and the correct understanding of depreciation calculation. The correct calculation, considering a straight-line depreciation over 6 years with a residual value, should indeed result in a different carrying amount by 1 July 2016, which is not accurately represented in the initial explanation. The correct carrying amount, taking into account the straight-line depreciation from the purchase until 1 July 2016 (4 years of depreciation), should be calculated as follows: Original cost ($56,000) - Accumulated depreciation over 4 years [4 years * ($48,000 depreciation base / 6 years)] = $56,000 - $32,000 = $24,000. This corrects the initial oversight and aligns with the principle of straight-line depreciation, but it does not match the provided answer choices directly, indicating a need for clarification in the question's premise or the answer choices.

HRH 'S Balance Sheet of 30 June 2014 Shows a Motor