Accounting Multiple Choice Question – 27 November 2019

The home of multiple choice questions for all your KS3, KS4 and KS5 Business Studies, Economics and Accounting requirements.

Accounting

On 1 April 1991, a firm bought a machine for £420,000. On that date, the machine had an expected useful economic life of five years and an expected residual value of £20,000. On 1 April 1995, the firm spent £240,000 on a major refurbishment of the machine which extended its useful life by three years and revised its estimated residual value to £60,000.

If the firm uses the straight-line method of depreciation, the depreciation charge for this machine, to be included in the accounts for the year ended?

Select ONE answer:

  1. £65,000
  2. £70,000
  3. £80,000
  4. £93,333

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 2

  1. Not Correct
  2. Initial depreciation charge = (£420,000 – £20,000) / 5 = £80,000 p.a.
    Depreciation charge for the years ended 31 March 1992 – 31 March 1995 (4 years) : £80,000 * 4 = £320,000
    Net Book Value at 1 April 1995 before refurbishment = £420k – £320k = £100,000
    Revised annual depreciation = (£100k + £240k – £60k) / 4 = £70,000
  3. Not Correct
  4. Not Correct

 

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Author: stuart001uk2014

Referral marketing, business, economics and accounting s​pecialist & corporate mentor

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