SIDC Module 7 Financial statements and the reporting framework question: residual value of RM50,000 and a five-year useful life

SIDC Module 7Financial statements and the reporting framework

A machine cost RM500,000, has a residual value of RM50,000 and a five-year useful life, and is depreciated straight-line. What is its carrying amount after two years?

A RM300,000
B RM320,000
C RM350,000
D RM410,000

Show the answer and explanation

Answer: B. RM320,000

Annual depreciation = (cost − residual) ÷ life = (500,000 − 50,000) ÷ 5 = RM90,000. After two years, carrying amount = 500,000 − 2 × 90,000 = RM320,000. RM300,000 ignores the residual value (100,000 a year). RM410,000 deducts only one year. RM350,000 deducts the residual value as well as two years' depreciation of RM75,000. Source: SIDC Module 7 Study Outline (Jul-Dec 2026) Topic 2 Elements of Financial Statements, 2.2; MFRS 116 Property, Plant and Equipment (as at October 2026).

Common mistake

Ignoring the residual value when computing straight-line depreciation.

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