On the first day of the year Mayo Resources purchased a forklift truck for $12 000 which is to be depreciated by 25% a year. At the end of the first year:
A) depreciation in the income statement is $3000 and the carrying value of the forklift in the balance sheet is $12 000.
B) depreciation in the income statement is $3000 and the carrying value of the forklift in the balance sheet is $15 000.
C) depreciation in the income statement is $3000 and the carrying value of the forklift in the balance sheet is $9000.
D) depreciation in the income statement is $0 and the carrying value of the forklift in the balance sheet is $12 000.

Question

Quizplus · Accepted Answer

The depreciation for the first year will be 25% of the purchase price of the forklift, which is $12,000 x 25% = $3,000. This amount will be recorded as an expense in the income statement. The carrying value of the forklift in the balance sheet will be the purchase price minus the accumulated depreciation, which is $12,000 - $3,000 = $9,000. Therefore, the correct choice is C.

On the First Day of the Year Mayo Resources Purchased