Hightop's balance sheet of 30 June 2018 shows a motor vehicle at a cost price of $46 000 less accumulated depreciation of $17 500. 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 $4 000, its carrying amount on 1 July 2020 is:

Question

Quizplus · Accepted Answer

The annual depreciation of the vehicle can be calculated as follows:

Annual depreciation = (Cost - Residual value) / Useful life
Annual depreciation = ($46,000 - $4,000) / 6
Annual depreciation = $7,000

Depreciation for the period from 1 July 2018 to 30 June 2020 (2 years) can be calculated as follows:

Depreciation for 2 years = $7,000 x 2
Depreciation for 2 years = $14,000

The carrying amount of the vehicle on 1 July 2020 can be calculated as follows:

Carrying amount = Cost - Accumulated depreciation
Carrying amount = $46,000 - $17,500 - $14,000
Carrying amount = $14,500

Therefore, the correct answer is C) $14,500.

Hightop's Balance Sheet of 30 June 2018 Shows a Motor