JJ Ltd acquired a new plant at a cost of R2,350,000 on 1 January 2020. The plant had an estimated residual value of R67,000. The directors of the company were convinced that the plant’s expected production life was 4,500,000 units. The plant produced 830 units and 780 units during the first and second years of use, ending 31 December 2020 and 31 December 2021, respectively.

Calculate the carrying amount of the plant at the end of 31 December 2021:

Select one:

a. R2,409,193
b. R2,836,193
c. R1,533,193
d. R1,455,193

To calculate the carrying amount, we need to determine the accumulated depreciation. We know that the plant's cost is R2 350 000 and the estimated residual value is R67 000. The depreciation per unit can be calculated as (cost - residual value) / expected production life. In this case, it is (R2 350 000 - R67 000) / 4 500 000 = R0.517 per unit.

For the first year, the depreciation expense is 830 units x R0.517 = R428.41. The carrying amount at the end of the first year is R2 350 000 - R428.41 = R1 921 571.59.

For the second year, the depreciation expense is 780 units x R0.517 = R403.86. The carrying amount at the end of the second year is R1 921 571.59 - R403.86 = R1 517 084.73.

Therefore, the carrying amount of the plant at the end of 31 December 2021 is R1 533 193, which is option c.

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