Pro-rata reducing balance depreciation after part-exchange Steps:

• Depreciate existing machinery for 6 months (1 Jan to 30 Jun 2017): 20% × (6/12) × $20,000 =$2,000; NBV = $18,000.
• Adjust for part-exchange: subtract old machine NBV $500, add new machine$6,000; total NBV = $23,500.
• Depreciate adjusted NBV for 7 months (30 Jun 2017 to 31 Jan 2018): 20% × (7/12) × $23,500 =$2,742; final NBV = $20,758. Why C is correct:
• C matches $20,758, accurately applying time-apportioned reducing balance depreciation (IAS 16) to held periods post-acquisition and disposal. Why the others are wrong:
• A ignores part-exchange adjustment, overstating NBV.
• B uses straight-line instead of reducing balance method.
• D assumes full-year depreciation on new machine, ignoring 7-month period.

Final answer: C