On 31 December 2011 a new motor vehicle with a life of five years and no estimated residual value was purchased by a business at a cost of $23 000,net of GST.The diminishing-balance depreciation method is employed.At a rate of 25% p.a.what is the carrying value of the motor vehicle at 31 December 2013 after charging depreciation for that year?

Question

Quizplus · Accepted Answer

Using the diminishing-balance method, the depreciation rate for the first year is 25%.
Thus, depreciation for the first year = 25% x $23,000 = $5,750
So, the carrying value at the end of the first year = $23,000 - $5,750 = $17,250
For the second year, we will apply the 25% depreciation rate on the carrying value of $17,250, giving us a depreciation of $4,312.50.
Therefore, the carrying value at the end of the second year = $17,250 - $4,312.50 = $12,937.50.
Therefore the answer is B.

On 31 December 2011 a New Motor Vehicle with a Life