Day: March 26, 2024

Accounting Multiple Choice Question – 26 March 2024

The home of multiple choice questions for all your KS3, KS4 and KS5 Business Studies, Economics and Accounting requirements.

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On 1 January 2014 Alex plc purchased a new machine at a cost of £96,720.

Delivery costs were £3,660 and internal administration costs of £9,450 were incurred.

At that time Alex plc planned to replace the machine in 5 years, when it would have no value, and to depreciate the machine on a straight-line basis.

Alex plc decides on 1 January 2016 that the machine only has one remaining year of useful life.

There is no expected change to the residual value at the end of its life.

How much depreciation will be charged in respect of this machine in Alex plc’s income statement for the year-ended 31 December 2016?

Select ONE answer:

  1. £33,460
  2. £58,032
  3. £60,228
  4. £65,898

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 – The internal administration costs cannot be treated as part of the asset’s cost, so in the first two years’ depreciation of (£96,720 + £3, 660)/ 5 x 2 = £40,152 was charged. This means that the whole of the remaining carrying amount of £60,228 must be allocated as depreciation in 2016 given the revision of the asset’s useful life.
  3. Not correct
  4. Not correct

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