Edwards Ltd Has Two Pieces of Equipment in Its Balance

question 18

Multiple Choice

Edwards Ltd has two pieces of equipment in its balance sheet as follows:
$\begin{array} { l c c c c c } \begin{array} { l } \text { Item } \\\text { no. }\end{array} & \begin{array} { c } \text { Cost or } \\\text { revalued } \\\text { amount }\end{array} & \begin{array} { c } \text { Accumulated } \\\text { Depreciation }\end{array} & \text { Value in Use } & \text { Fair value } & \begin{array} { c } \text { Estimated } \\\text { cost to sell }\end{array} \\1 & \$ 600000 & \$ 100000 & \$ 600000 & \$ 450000 & \$ 20000 \\2 & \$ 800000 & \$ 400000 & \$ 450000 & \$ 500000 & \$ 25000 \\\text { Total } & \$ \mathbf { 4 0 0 0 0 0 } & \$ \mathbf { 5 0 0 0 0 0 } & & &\end{array}$
-If Edwards Ltd applies the cost model to the assets, at what amount will asset 2 be reported in the balance sheet?

• A)$400,000
• B)$450,000
• C)$500,000
• D)$475,000

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