Day: March 19, 2024

Alex Ltd’s policy for depreciation of its plant and machinery is to charge depreciation monthly at 20% per year on cost.

Alex Ltd’s plant and machinery account for the year ended 30 September 2023 is shown below:

PLANT AND MACHINERY

Dr Entries =
2022
1 Oct Balance (all plant purchased after 20X0) £200,000

2023
1 Apr Cash purchase of plant £50,000

Total £250,000

                        Cr Entries = 
                        2023
                        30 Jun  Disposal account                                £40,000
                        30 Sep  Balance                                         £210,000

                        Total                                                               £250,000

What should be the depreciation charge in Alex Ltd’s income statement for plant and machinery (excluding any profit or loss on the disposal) for the year ended 30 September 2023?

Select ONE answer:

1. £43,000
2. £51,000
3. £42,000
4. £45,000

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. Correct – (Plant held all year (200,000 -40,000) x 20% = £32,000 + Disposal 40,000 x 20% 9/12 = £6,000 + Additions 50,000 x 20% x 6/12 = £5,000 ==> £43,000
2. Not correct
3. Not correct
4. Not correct

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