SIDC Module 7 Financial statements and the reporting framework question: year on the reducing-balance basis

SIDC Module 7Financial statements and the reporting framework

The same RM500,000 machine is instead depreciated at 30% a year on the reducing-balance basis. What is its carrying amount after two years?

A RM200,000
B RM245,000
C RM300,000
D RM350,000

Show the answer and explanation

Answer: B. RM245,000

Reducing balance applies the rate to the opening carrying amount: year 1 depreciation 500,000 × 30% = 150,000 (carrying 350,000); year 2: 350,000 × 30% = 105,000 (carrying 245,000). RM200,000 deducts 30% of cost twice (straight-line at 30%). RM350,000 is the carrying amount after one year. RM300,000 deducts 20% twice. Source: SIDC Module 7 Study Outline (Jul-Dec 2026) Topic 2 Elements of Financial Statements, 2.2; MFRS 116 (as at October 2026).

Common mistake

Applying the reducing-balance rate to the original cost each year.

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