Tag: AQA

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:

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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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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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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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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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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.

 

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