A firm owns fixed assets which, in total, cost £200,000. Aggregate depreciation on these assets amounts to £80,000. If the firm depreciates its fixed assets at the rate of 20% per annum, using the straight-line method, the depreciation charge in its profit and loss account for the current accounting period is:
Select ONE answer:
- £16,000
- £20,000
- £24,000
- £40,000
Show your workings to arrive at your answer, and explain and justify your reasons:
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This multiple-choice question is suitable for Accounting KS5 classes.
The answer is 4
- Not Correct
- Not Correct
- Not Correct
- £200,000 * 20% = £40,000 – Aggregate depreciation is relevant only when calculating reducing balance depreciation, which is calculated on the basis of net book value. The depreciation charge calculated by reference to the straight-line method is always a percentage of original cost or a revalued amount, less an estimated residual value, where appropriate.
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