Month: November 2019

On 1 January 1993, a firm, whose financial year-end is 31 December, bought an item of plant for £10,000. Initially, it was decided to depreciate the plant for over ten years, using the straight-line method, assuming no residual value.

On 1 January 1995, it became apparent that the plant would last only another five years, over which period it would be used equally.

The depreciation charge for 1995 in respect of the above item was:

Select ONE answer:

1. Loss of £2,000
2. Loss of £3,000
3. Loss of £3,500
4. Profit of £4,000

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 3

1. Not Correct
2. Not Correct
3. Initial annual depreciation = (£10,000 – £0) / 10 = £1,000 p.a.
   Aggregate depreciation to 31 December 1994 = £1,000 p.a. * 2 years = £2,000
   Net Book Value (NBV) at 1 January 1995 = £10,000 – £2,000 = £8,000
   Revised annual depreciation = £8,000 / 5 = £1,600 p.a.
4. Not Correct

 

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On 31 August 1992 a firm bought a machine for £44,000. At that date, the estimated useful economic life of the machine was seven years and its estimated residual value was £2,000.

On 30 June 19% the firm sold the machine for £18,000. The firm’s accounting period—end is 31 December and its policy is to calculate depreciation using the straight line method, charging a full year’s depreciation in the year of acquisition and no depreciation in the year of disposal.

The profit earned. or the loss incurred, on the disposal of the machine was:

Select ONE answer:

1. Loss of £2,000
2. Loss of £3,000
3. Loss of £3,500
4. Profit of £4,000

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 1

1. Annual depreciation charge = (£44,000 – £2,000) / 7 = £6,000
   Total depreciation charged = 4 years * £6,000 pa. = £24,000 (1996 = 0)
   NBV = Cost – Total depreciation = £44,000 – £24,000 = £20,000
   Profit or loss on sale = Proceeds – NBV = £18,000 – £20,000 = £2,000 loss
2. Not Correct
3. Not Correct
4. Not Correct

 

This work is licensed under a Creative Commons Attribution 4.0 International License.

On 1 January 1993, a firm bought a second-hand van for £6,000 and paid £260 to have the firm’s name and logo painted on it.

The firm depreciates vehicles over a five year period using the straight—line method. assuming a nil residual value. A full year’s depreciation is charged in the year of acquisition and none in the year of disposal. The firms accounting year-end is 31 December.

What was the profit on the sale of the van, if it was sold for £5,000 on 31 March 1996

Select ONE answer:

1. £1,000
2. £1,244
3. £2,496
4. £2,600

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 3

1. Not Correct
2. Not Correct
3. Annual depreciation charge = (£6,000 + £260) / 5 = £1,252
   Total depreciation charged = 3 years * £1,252 pa = £3,756 (1996 = 0)
   NBV = Capital cost – Total depreciation = £6,260 – £3,756 = £2,504
   Profit or loss on sale = Proceeds – NBV = £5,000 – £2,504 = £2,496 Profit
4. Not Correct

 

This work is licensed under a Creative Commons Attribution 4.0 International License.

The balance on a firm‘s plant and machinery account on 1 January 1996 was £5,000.

During that year the following transactions took place on the dates shown.

1 May – Plant, which had originally cost £750, was sold.
1 September – New machinery costing £3000 was purchased.

If depreciation is calculated at the rate of 10% per annum, on a strict time basis, using the straight-line method. the depreciation charge on plant and machinery for 1996, to the nearest pound, is:

Select ONE answer:

1. £525
2. £550
3. £600
4. £625

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. Period: Calculation = Total
   1 January – 30 April: £5,000 * 10% * 4/12 = £166.66
   1 May – 31 August: (£5,000 – £750) * 10% * 4/12= £141.66
   1 September – 31 December: (£5,000 – £750 + £3,000) * 10% * 4/ 12 = £241.66
   Total for the year (to the nearest pound – £550.00
3. Not Correct
4. Not Correct

 

This work is licensed under a Creative Commons Attribution 4.0 International License.

A loss incurred upon the disposal of plant and equipment should be . . .

Select ONE answer:

1. credited to the plant and equipment account.
2. debited to the profit and loss account.
3. debited to the provision for depreciation account.
4. credited to the provision for depreciation account.

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. All profits and losses are recorded in the profit and loss account. Losses are recorded as debits and profits are recorded as credits. The profit earned or loss incurred on disposal is ‘calculated’ in the relevant disposal account. In the case of a loss, the balance on this account will be a credit. This is then transferred to the profit and loss account as a debit.
3. Not Correct
4. Not Correct

 

This work is licensed under a Creative Commons Attribution 4.0 International License.