Month: November 2019

The following information relates to one of several fixed assets acquired by a firm on 1 January 1996.

• Cost £ 29,800
• Estimated scrap value £ 5,000
• Estimated useful economic life 8 years

If all of the firm’s fixed assets are depreciated at the rate of 20% per annum, using the reducing balance method, the total depreciation charged on the above asset up to 31 December 2003 will be:

Select ONE answer:

1. £4,960
2. £15,960
3. £24,800
4. £29,800

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. 1 January 1996 to 31 December 2003 = 8 years = the estimated useful life of the asset. The total depreciation to be charged over the estimated useful life of any fixed asset (irrespective of depreciation method used) = Cost – Estimated scrap value = £29,800 – £5,000 = £24,800. Therefore, the total depreciation charged on this asset up to 31 December 2003 is £24,800. You will get the same answer if you work out the depreciation year by year.
4. Not Correct

 

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

A firm depreciates its productive plant and equipment at the rate of 10% per annum, using the reducing balance method. It is the firm’s policy to charge a full year’s depreciation on fixed assets in the year in which they are acquired.

Given the above, what is the depreciation charge, to the nearest pound, to be shown in the 1995 accounts in relation to an item of plant, with no residual value, acquired in 1991 for £10,000?

Select ONE answer:

1. £591
2. £656
3. £729
4. £1,000

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 2

1. Not Correct
2. Cost in 1991 £ 10,000 . NBV at 31 December 1994 NBV £6,561 – 1995 depreciation charge = 10% of NBV £656
3. Not Correct
4. Not Correct

 

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

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:

1. £16,000
2. £20,000
3. £24,000
4. £40,000

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 4

1. Not Correct
2. Not Correct
3. Not Correct
4. £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.

 

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

A firm bought a fixed asset for £500,000. The asset has an estimated useful economic life of ten years and an estimated scrap value of £50,000.  If the asset is depreciated at the rate of 20% per annum, using the reducing balance method, the depreciation charge, in relation to this asset alone, in the second year of its life will be:

Select ONE answer:

1. £45,000
2. £72,000
3. £80,000
4. £90,000

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 2

1. Not correct
2. Year 1 depreciation charge = (£500,000 – £50,000) * 20% = £90,000 & Year 2 depreciation charge = [(£500,000 – £50,000) — £90,000] * 20% = £72 000
3. Not correct
4. Not correct

 

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

A firm bought a machine for £33,000. lt expects to use the machine for eleven years and then sell it for £11,000. If the firm calculates depreciation by reference to the straight-line method, the annual depreciation charge, in respect of this machine, will be:

Select ONE answer:

1. £1,000
2. £2,000
3. £2,500
4. £3,000

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 2

1. Not correct
2. Annual depreciation charge using the straight-line method of depreciation = [(Cost – estimated residual value) / estimated useful economic life] = (£33,000 – £11,000) / 11 = £2,000 p.a
3. Not correct
4. Not correct

 

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