Chelonia Mydas recently 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 of the machine for tax purposes is $200,000. This is because the machine was purchased for $500,000 three years ago and can be fully depreciated for tax purposes over 5 years. Therefore, the annual depreciation expense is $500,000 / 5 = $100,000. The carrying amount of the machine is the original cost minus the accumulated depreciation. Therefore, the carrying amount of the machine is $500,000 - (3 x $100,000) = $200,000.

Chelonia Mydas Recently Purchased a Machine for $500 000 Three