Day: March 12, 2024

An asset was purchased by Alex Trading plc on 1 January 2021 for:

• Cost – £1,000,000
• Annual licence fee – £15,000
• Total – £1,015,000

The business adopts a date of 31 December as its reporting year end.

The asset was traded in for a replacement asset on 1 January 2024 at an agreed value of £500,000.

It has been depreciated at 25% per annum on the reducing-balance method.

What figure is included regarding this disposal in the income statement for the year ended December 2024?

Select ONE answer:

1. £25,000 profit
2. £78,125 profit
3. £62,500 loss
4. £250,000 loss

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 1,000,000
   • 2021 Depreciation – £250,000 NBV 750,000
   • 2022 Depreciation – £187,500 NBV 562,500
   • 2023 Depreciation – £140,625 NBV 421,875
   • 2024 Part Exchange – £500,000 Profit £78,125
3. Not correct
4. Not correct

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