On 31 December 2014 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 2016 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: 25% x $23,000 = $5,750
Year 2: 25% x ($23,000 - $5,750) = $4,312.50

To calculate the carrying value at 31 December 2016, we need to deduct the accumulated depreciation from the original cost:

Carrying value = $23,000 - ($5,750 + $4,312.50) = $12,937.50

Therefore, the correct answer is D.

On 31 December 2014 a New Motor Vehicle with a Life