Chelonia Mydas purchased a machine for $500 000 three years ago. The machine can be fully depreciated for tax purposes over 5 years. The tax rate is 30 per cent. What is the carrying amount of this machine for tax purposes?

Question

Quizplus · Accepted Answer

The carrying amount for tax purposes after 3 years, given a 5-year full depreciation schedule, is $200,000. This is because each year, 20% (100%/5 years) of the machine's value is depreciated. After 3 years, 60% of the machine's value has been depreciated, leaving 40% of the original value. 40% of $500,000 is $200,000.

Chelonia Mydas Purchased a Machine for $500 000 Three Years