FK Ltd's fleet of delivery trucks (original cost $850 000) had a carrying amount on 1 July 2012 of $470 000. On that date their value was revised to $500 000. Future depreciation charges will be based on which amount?

Question

Quizplus · Accepted Answer

The future depreciation charges should be based on the revised value of the asset, which is $500 000. This is because the carrying amount has been adjusted to reflect the current value of the asset. Using the original cost or the old carrying amount would not accurately reflect the true value of the asset and could lead to over or under depreciation.

FK Ltd's Fleet of Delivery Trucks (Original Cost $850 000)