Depreciation charge for revising the scrap value ( video below)

AAA Co purchased a machine with an estimated useful life of 5 years for $34,000 on 30 September 20X3. AAA Co planned to scrap the machine at the end of its useful life and estimated that the scrap value at the purchase date was $4,000. On 1 October 20X6, AAA Co revised the scrap value to $2,000 due to the decreased value of scrap metal.

What is the depreciation charge for the year ended 30 September 20X7?

Answer

Carrying amount at 1.10.X6: 34,000 – ((34,000 – 4,000) × 3/5) = $16,000 Revised depreciation charge:

(Carrying amount – revised residual value)/remaining useful life

= (16,000 – 2,000 )/2 = $7,000

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