Accounting Multiple Choice Question – 4 March 2024

Alex Trading Ltd buys a machine on 31 August 2019 for £22,000.

It has an expected life of seven years and an estimated residual value of £1,000.

On 30 June 2023 the machine is sold for £9,000.

Alex Trading Ltd’s year-end is 31 December.

Alex trading Ltd’s accounting policy is to charge depreciation monthly using the straight-line method.

The loss on disposal of the machine which will appear in the income statement for the year ended 31 December 2023 is?

Select ONE answer:

1. £1,000
2. £1,500
3. £3,500
4. £5,800

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 2

1. Not correct
2. Correct – Cost of asset = £22,000 – Accumulated depreciation (46 months x (21,000/84)) = £10,500 the carrying amount at date of disposal less Proceeds on disposal £9,000 = Loss on disposal £1,500
3. Not correct
4. Not correct

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