Day: March 30, 2024

Alex plc includes profits and losses on disposal of non-current assets in administrative expenses in its income statement.

Alex plc’s policy is for depreciation to be charged on fixtures and fittings at 20% using the reducing balance method.

On 1 July 2016, some fixtures that cost £4,000 on 1 July 20X3 were sold for £150.

In the administrative expenses account Alex plc must?

Select ONE answer:

1. Debit £1,450
2. Credit £1,450
3. Debit £1,898
4. Credit £1,898

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 3

1. Not correct
2. Not correct
3. Correct – The debit to administrative expenses is the loss on disposal of £1,898. Cost £4,000 – Acc depn (£4,000 – (£4,000 x 0.8 x 0.8 x 0.8)) £1,952 – Proceeds £150 = Loss of £1,898 i.e. debit to administrative expenses
4. Not correct

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