Accounting Online Program Certification Practice Test

What was the carrying amount of Redruth plc's plant and equipment at 31 March 20X6?

1. £399,960

2. £257,835

3. £614,500

4. £399,000

The correct answer is: £257,835

To determine the carrying amount of Redruth plc's plant and equipment at the specific date of 31 March 20X6, it's essential to consider the components that influence the carrying amount, including original cost, accumulated depreciation, and any impairments or revaluations that may apply. The correct figure represents the net book value of the plant and equipment after accounting for depreciation over its useful life. Depreciation systematically reduces the asset's carrying amount on the balance sheet to reflect its decline in value as it is used in operations. In calculating the carrying amount, the methodology typically employed includes taking the historical cost of the assets and subtracting the accumulated depreciation. This reflects the current value of the assets to the company, which is what stakeholders are primarily interested in when assessing financial health and operational capabilities. Choosing the figure of £257,835 indicates that the proper depreciation methods and time periods have been considered, leading to an accurate reflection of the plant and equipment’s value at that date. This computation will include both regular wear and tear as well as possible adjustments for any impairment losses that may have impacted the value of the assets. Understanding how to calculate carrying amounts accurately is crucial for financial reporting and analysis, as it helps ensure that company statements provide a