Month: March 2024

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

This work is licensed under a Creative Commons Attribution 4.0 International License.

Alex plc purchased a machine for £120,000 on 1 October 2018.

The estimated useful life is 4 years with a residual value of £4,000.

Alex plc uses the straight-line method for depreciation and charges depreciation on a monthly basis.

The charge for depreciation in the income statement for the year ended 31 December 2018 is?

Select ONE answer:

1. £4,833
2. £7,250
3. £7,500
4. £29,000

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 2

1. Not correct
2. Correct– (£120,000-4,000) / 48 x 3 = £7,250
3. Not correct
4. Not correct

This work is licensed under a Creative Commons Attribution 4.0 International License.

Alex plc bought a car on 1 January 2017 for £10,000 and decided to depreciate it at 30% per annum on a reducing balance basis.

It was disposed of on 1 January 2019 for £6,000.

The net effect on the income statement for the year ended 31 December 2019 is a credit of?

Select ONE answer:

1. £1,100
2. £3,000
3. £4,000
4. £5,100

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 – (£10,000 x 70% x 70%) – £6,000 = £1,100
2. Not correct
3. Not correct
4. Not correct

This work is licensed under a Creative Commons Attribution 4.0 International License.

Alex plc purchases a machine for which the supplier’s list price is £18,000.

Alex plc pays £13,000 in cash and trades in an old machine which has a carrying amount of £8,000.

It is the company’s policy to depreciate such machines monthly at the rate of 10% per annum on cost.

The carrying amount of the new machine after one year is?

Select ONE answer:

1. £16,200
2. £18,000
3. £18,900
4. £21,000

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 – £18,000 x 90% = £16,200
2. Not correct
3. Not correct
4. Not correct

This work is licensed under a Creative Commons Attribution 4.0 International License.