Accounting Multiple Choice Question – 26 November 2019

On 1 January 1993, a firm bought a machine for £4,200. At that date, the machine’s useful economic life was estimated to be seven years and its scrap value was estimated to be zero. On 1 January 1995, the machine’s useful economic life was re-estimated to be five years in total and its scrap value was re-estimated to be £300.

If the straight-line method of depreciation was used to depreciate the machine, the depreciation charged on it for 1995 was?

Select ONE answer:

1. £540
2. £780
3. £840
4. £900

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 4

1. Not Correct
2. Not Correct
3. Not Correct
4. Initial annual depreciation — (£4,200 – £0) / 7 = £600 p.a.
   Depreciation from 1 January 1993 to 31 December 1994 (2 years) = £600 * 2 = £1,200
   Net Book Value (NBV) at 1 January 1995 = £4,200 – £1,200 = £3,000
   Revised annual depreciation = (£3,000 – £300) / 3 = £900 p.a.

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Author: stuart001uk2014

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