XYZ Co purchased an asset for $25,000 on 1.1.X3. It had an estimated useful life of 5 years and it was depreciated using the straight line method. On 1.1.X5 XYZ Co revised the remaining estimated useful life to 4 years.
What is the carrying amount of the asset at 31.12.X5?
Answer
Carrying amount at 1.1.X5 = 25,000 – (25,000 x 2/5) = $15,000
New depreciation charge = Carrying amount/Revised useful life
= $15,000 /4 years = $3,750
Carrying amount at 31.12.X5 = $15,000 – $3,750 = $11,250