Tag: AQA

On 1 January 1993, a firm bought a second-hand van for £6,000 and paid £260 to have the firm’s name and logo painted on it.

The firm depreciates vehicles over a five year period using the straight—line method. assuming a nil residual value. A full year’s depreciation is charged in the year of acquisition and none in the year of disposal. The firms accounting year-end is 31 December.

What was the profit on the sale of the van, if it was sold for £5,000 on 31 March 1996

Select ONE answer:

1. £1,000
2. £1,244
3. £2,496
4. £2,600

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. Annual depreciation charge = (£6,000 + £260) / 5 = £1,252
   Total depreciation charged = 3 years * £1,252 pa = £3,756 (1996 = 0)
   NBV = Capital cost – Total depreciation = £6,260 – £3,756 = £2,504
   Profit or loss on sale = Proceeds – NBV = £5,000 – £2,504 = £2,496 Profit
4. Not Correct

 

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The balance on a firm‘s plant and machinery account on 1 January 1996 was £5,000.

During that year the following transactions took place on the dates shown.

1 May – Plant, which had originally cost £750, was sold.
1 September – New machinery costing £3000 was purchased.

If depreciation is calculated at the rate of 10% per annum, on a strict time basis, using the straight-line method. the depreciation charge on plant and machinery for 1996, to the nearest pound, is:

Select ONE answer:

1. £525
2. £550
3. £600
4. £625

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. Period: Calculation = Total
   1 January – 30 April: £5,000 * 10% * 4/12 = £166.66
   1 May – 31 August: (£5,000 – £750) * 10% * 4/12= £141.66
   1 September – 31 December: (£5,000 – £750 + £3,000) * 10% * 4/ 12 = £241.66
   Total for the year (to the nearest pound – £550.00
3. Not Correct
4. Not Correct

 

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

A loss incurred upon the disposal of plant and equipment should be . . .

Select ONE answer:

1. credited to the plant and equipment account.
2. debited to the profit and loss account.
3. debited to the provision for depreciation account.
4. credited to the provision for depreciation account.

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. All profits and losses are recorded in the profit and loss account. Losses are recorded as debits and profits are recorded as credits. The profit earned or loss incurred on disposal is ‘calculated’ in the relevant disposal account. In the case of a loss, the balance on this account will be a credit. This is then transferred to the profit and loss account as a debit.
3. Not Correct
4. Not Correct

 

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

When a machine is disposed of, the correct way to record the total depreciation charged on it up to the date of disposal is:

Select ONE answer:

1. should be included in the trial balance as a debit balance.
2. should be included in the trial balance as a credit balance.
3. should sometimes be included in the trial balance as a debit balance and sometimes as a credit balance.
4. should not be included in the trial balance at all.

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. The (credit) balance on the provision for depreciation of machinery account in a firm’s nominal (general) ledger represents the total depreciation charged to date on machinery currently owned by the firm. When machinery is disposed of, the total depreciation charged on it must be removed from the account – by debiting it. The machinery disposal account is used to calculate any profit or loss arising on the disposal of machinery. This profit or loss is calculated as the difference between the proceeds of the disposal and the net book value of the item(s) being disposed. To achieve this, both the proceeds and the net book value are transferred into the disposal account and any difference is transferred to the profit and loss account. As the net book value of a fixed asset is its cost (or valuation) less than the total depreciation charged on it, both of these must be transferred into the disposal account. In the case of the total depreciation, this is achieved by answer 2.
3. Not Correct
4. Not Correct

 

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Upon the disposal of a vehicle, the double-entry which a furniture retailer should make to record the receipt of the sale proceeds is:

Select ONE answer:

Account to Debit        Account to Credit

1. Bank                                  Sales
2. Vehicle disposals            Vehicle
3. Bank                                  Vehicle disposals
4. Vehicle                              Provision for depreciation

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. The disposal of a fixed asset is not a ‘sale’ and therefore should not be recorded in the sales account. Only sales of goods which were purchased with the intention of being re-sold should be recorded in the sales account.
2. This is the double-entry required to transfer of cost of the vehicle being disposed of out of the vehicle account and into the vehicle disposal account.
3. As money has been received, the bank balance will improve. Such an increase in an asset account requires a debit entry. The vehicle disposal account is used to calculate any profit or loss arising on the disposal. Therefore. the amount of the proceeds, clearly part of the calculation. must be recorded in that account – as a credit since the entry in the bank account is a debit.
4. This is not the correct way to record any part of a fixed asset disposal.

 

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