Accounting Online Program Certification Practice Test

What was the carrying amount of Spam plc's machine at the statement of financial position on 31 May 20X6?

1. £20,550

2. £21,000

3. £19,200

4. £20,000

The correct answer is: £20,550

Determining the carrying amount of an asset, such as a machine, at a specific date involves understanding the acquisition cost, any accumulated depreciation, and any impairments that may have been recognized. In this scenario, if £20,550 is the correct answer, it suggests that this figure represents the original cost of the machine reduced by the accumulated depreciation up to the reporting date of 31 May 20X6. The process of calculating this amount typically follows these steps: 1. **Identify the Acquisition Cost**: This is the initial cost incurred to acquire the machine. 2. **Calculate Accumulated Depreciation**: This requires applying the depreciation method chosen (straight-line, declining balance, etc.) over the relevant periods, accounting for any additional factors such as maintenance costs or improvements affecting the depreciation. 3. **Adjust for Impairment** (if applicable): If the machine's market value has significantly dropped below its book value, an impairment loss may need to be recorded. The carrying amount is thus computed as the acquisition cost minus any accumulated depreciation and impairment losses. The resulting figure of £20,550 indicates that the value captured in the financial records reflects these calculations accurately up to the stated date. This is crucial for representing the machine