What is the Carrying Amount?
The carrying amount is the original cost of an asphối as reflected in a company’s books or balance sheetBalance SheetThe balance sheet is one of the three fundamental financial statements. These statements are key to both financial modeling và accounting, minus the accumulated depreciation of the asset. It is also called book value and is not necessarily the same as an asset’s fair valueFair ValueFair value refers lớn the actual value of an asphối - a sản phẩm, stoông chồng, or security - that is agreed upon by both the seller và the buyer. Fair value is applicable lớn a hàng hóa that is sold or traded in the market where it belongs or under normal conditions - and not lớn one that is being liquidated. or market value.quý khách sẽ xem: Carrying amount là gì
Carrying Amount vs. Market Value
Carrying amount & market value differ in many ways, as listed below:
Example of Carrying Amount
Let’s say a company owns a tractor worth $80,000 to be used for developing its newest land property. The said tractor’s annual depreciation is $3,000 & is expected to still be of use for trăng tròn years, at which time the salvage value is expected khổng lồ be $20,000. The annual depreciation is therefore $3,000 ($80,000-20,000)/đôi mươi years. At the end of the đôi mươi years, the tractors carrying amount is $20,000.
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Example of Fair Value
Given the same tractor, its fair value will depkết thúc on the supply and demvà in the market. If, at the time it was sold in the market, the dem& for tractors is high, it can be priced higher than its carrying value. The opposite can also be true if the dem& goes down. The price of the tractor can go up or down, depending on how much buyers are willing to lớn give sầu for it.
Carrying Value vs. Book Value
How to Calculate for Carrying Amount
It is a very simple task lớn calculate for carrying amount, as shown in the example above sầu. But lớn make it clearer, let’s explain it below:
Take the original cost of purchasing the asset less salvage value.Divide that number by the number of years the asphối is expected lớn be of use to generate the annual depreciation amount và record annually.Calculate the accumulated depreciation (number of years past * annual depreciation)Subtract the accumulated depreciation from the original purchase price to get the carrying amount.Xem thêm: Bbq Nghĩa Là Gì ? Làm Tiệc Nướng Bbq Cần Chuẩn Bị Những Gì? Bbq Nghĩa Là Gì
Depreciation in the Carrying Amount
Depreciation is the lowering of the value of a tangible asphối because of wear and tear. Tangible assets include buildings, equipment, furniture, & vehicles. One of the easiest and most commonly accepted methods of computing for depreciation is the straight-line depreciation methodStraight Line DepreciationStraight line depreciation is the most commonly used and easiest method for allocating depreciation of an asphối. With the straight line. Using the straight-line method, the same depreciation value is copied for every year, such as what was done in the above example wherein if the depreciation value for the first year is $3,000, it would be the same value for the succeeding years.
The other method is the double-declining balance depreciation methodDouble Declining Balance DepreciationThe double declining balance depreciation method is a khung of accelerated depreciation that doubles the regular depreciation approach. It is, otherwise known as the 200% declining balance method. With the DDB method, the depreciation is faster than that of straight-line but will not make the depreciation value bigger. It just means that depreciation is bigger in the early years but smaller in the later years.
Related Readings
certification program, designed khổng lồ help anyone become a world-class financial analyst. To keep advancing your career, the additional CFI resources below will be useful:
