On 31 December 2018 a new motor vehicle with a life of five years and no estimated residual value was purchased by a business at a cost of $48 000, net of GST. The diminishing-balance depreciation method is used at a rate of 20% p.a. What is the carrying value of the motor vehicle at 31 December 2020 after charging depreciation for that year?

Question

Quizplus · Accepted Answer

The annual depreciation rate using the diminishing-balance method is calculated as follows:

Year 1: 20% x $48,000 = $9,600
Year 2: 20% x ($48,000 - $9,600) = $7,680
Year 3: 20% x ($48,000 - $9,600 - $7,680) = $6,144

Therefore, the carrying value of the motor vehicle at 31 December 2020 is:

$48,000 - $9,600 - $7,680 - $6,144 = $24,576

Thus, the correct option is D, $38,400.

On 31 December 2018 a New Motor Vehicle with a Life