Accounting Multiple Choice Question – 14 November 2019

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

A firm depreciates its productive plant and equipment at the rate of 10% per annum, using the reducing balance method. It is the firm’s policy to charge a full year’s depreciation on fixed assets in the year in which they are acquired.

Given the above, what is the depreciation charge, to the nearest pound, to be shown in the 1995 accounts in relation to an item of plant, with no residual value, acquired in 1991 for £10,000?

Select ONE answer:

  1. £591
  2. £656
  3. £729
  4. £1,000

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. Cost in 1991 £ 10,000 . NBV at 31 December 1994 NBV £6,561 – 1995 depreciation charge = 10% of NBV £656
  3. Not Correct
  4. Not Correct

 

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Accounting Multiple Choice Question – 13 November 2019

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

A firm owns fixed assets which, in total, cost £200,000. Aggregate depreciation on these assets amounts to £80,000. If the firm depreciates its fixed assets at the rate of 20% per annum, using the straight-line method, the depreciation charge in its profit and loss account for the current accounting period is:

Select ONE answer:

  1. £16,000
  2. £20,000
  3. £24,000
  4. £40,000

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 4

  1. Not Correct
  2. Not Correct
  3. Not Correct
  4. £200,000 * 20% = £40,000 – Aggregate depreciation is relevant only when calculating reducing balance depreciation, which is calculated on the basis of net book value. The depreciation charge calculated by reference to the straight-line method is always a percentage of original cost or a revalued amount, less an estimated residual value, where appropriate.

 

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Accounting Multiple Choice Question – 12 November 2019

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

A firm bought a fixed asset for £500,000. The asset has an estimated useful economic life of ten years and an estimated scrap value of £50,000.  If the asset is depreciated at the rate of 20% per annum, using the reducing balance method, the depreciation charge, in relation to this asset alone, in the second year of its life will be:

Select ONE answer:

  1. £45,000
  2. £72,000
  3. £80,000
  4. £90,000

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. Year 1 depreciation charge = (£500,000 – £50,000) * 20% = £90,000 & Year 2 depreciation charge = [(£500,000 – £50,000) — £90,000] * 20% = £72 000
  3. Not correct
  4. Not correct

 

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Accounting Multiple Choice Question – 11 November 2019

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

A firm bought a machine for £33,000. lt expects to use the machine for eleven years and then sell it for £11,000. If the firm calculates depreciation by reference to the straight-line method, the annual depreciation charge, in respect of this machine, will be:

Select ONE answer:

  1. £1,000
  2. £2,000
  3. £2,500
  4. £3,000

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. Annual depreciation charge using the straight-line method of depreciation = [(Cost – estimated residual value) / estimated useful economic life] = (£33,000 – £11,000) / 11 = £2,000 p.a
  3. Not correct
  4. Not correct

 

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Accounting Multiple Choice Question – 10 November 2019

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

The net book value of a fixed asset, other then freehold land, which has not been revalued, is …..

Select ONE answer:

  1. the amount it cost to acquire it.
  2. the amount it would cost to buy it, or a similar asset, now.
  3. the amount it cost to acquire it less the aggregate (total) depreciation charged on it.
  4. the amount it cost to acquire it less its estimated scrap value.

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. is the asset’s actual cost.
  2. is the asset’s replacement cost
  3. Correct
  4. is the total amount of depreciation to be charged over the life of the asset.

 

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Accounting Multiple Choice Question – 9 November 2019

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

If the depreciation on a fixed asset is calculated by reference to the reducing balance method . . .

Select ONE answer:

  1. then, in relation to that particular fixed asset, there will be an equal depreciation charge in the profit and loss account of each year during the life of the asset.
  2. the depreciation charge in the profit and loss account in respect of that asset will decrease each year over the life of the asset.
  3. the depreciation charge in the profit and loss account relating to that asset will be greater in the later years of the life of the asset than in the earlier years.
  4. all other things being equal, net profit will be greater in the earlier years of the life of the asset than in the later years.

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. This would be true in relation to straight-line depreciation but it is not true in relation to reducing balance depreciation.
  2. Correct
  3. The reverse is true i.e. answer 2.
  4. All other things being equal, profit will be greater in the later years than in the earlier years of the life of the asset because the depreciation charge is declining over time.

 

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Accounting Multiple Choice Question – 8 November 2019

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

A business which owns all of its fixed assets should normally depreciate . . .

Select ONE answer:

  1. all of its fixed assets.
  2. all of its fixed assets which are of significant value.
  3. all of its fixed assets except freehold land.
  4. all of its fixed assets except land.

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. Freehold land is not normally depreciated because it has an infinite useful economic life. Sometimes, for example, if freehold land is subject to coastal erosion, it should be depreciated.
  2. As per answer A above, but also assets do not have to have a significant value to be depreciated. However, GAAP in general applies only to material (significant) amounts of money.
  3. Correct
  4. Leasehold land has to be depreciated because the lease (it is the lease, not the land, which has been paid for) has a finite life. Freehold land normally does not have to be depreciated because it has an infinite useful economic life. If a building is leased and improvements are made to it, the cost of those improvements should be depreciated over the remaining term of the lease – because once the lease expires, the improvements have no value to the firm which paid for them.

 

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