Determine the carrying value of the asset at the end

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An entity bought a furnace for $50 million on January 1, 2015. The furnace was brought into use the same day. The body of the furnace has useful life of 20 years on the date of purchase. However, the asset includes a burner which needs to be replaced every five years. Of the total cost of furnace which amounts to $50 million, the amount attributable to the burner at the date of purchase is $10 million. The entity depreciates all assets using a straight line basis down to a nil residual value.

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Problem 1: Determine the carrying value of the asset at the end of 2016.

Reference no: EM132932007

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