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A business purchased an asset on 1 January X1 at a cost of $1,600,000. The asset had an expected life of eight years and a residual value of $70,000. the straight-line method is used to measure depreciation. The financial year ends on 31 December.
At 31 December X3, the estimated remaining life of the asset from that date is now expected to be only three more years, but the residual value is unchanged.
What will be the carrying value (Net Book Value) of the asset as at 31 December X3 for inclusion in the statement of financial position?
The first part I did that is:
Depreciation charge per year = $(1600 000-7000)/8 yrs= $ 191250 per yearBut the second part I am confused.
Are you sure that you have typed the dates correctly.
If you have, then the carrying value at 31 dec X3 will be 1600000 – (3 x 191250)
From then on the depreciation each year will be this carrying value less 70000, all divided by 3. However if you have typed the dates correctly the new depreciation is not relevant.
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