An asset has a carrying amount of Rs. 400,000 and is depreciated at 25% per year using the reducing-balance method. What is its carrying amount after two years?
Correct answer: B. Rs. 225,000
- A. Rs. 200,000
- B. Rs. 225,000
- C. Rs. 250,000
- D. Rs. 300,000
Explanation
First-year depreciation is Rs. 100,000, leaving Rs. 300,000. Second-year depreciation is Rs. 75,000, so the carrying amount becomes Rs. 225,000.
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About Financial Statements
Financial statements present a business's financial performance and position through the income statement, statement of financial position, cash flow statement and changes in equity. Questions involve preparing and interpreting these statements, adjusting entries, depreciation, closing inventory, accrued and prepaid items, and distinguishing profit from cash flow.
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