Carrying amount of asset with revised useful life ( video below)

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

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