This multiple-choice question is suitable for Accounting KS5 classes.
The answer is 3
Not correct
Not correct
Correct – Carrying amount of computer traded in = £24,000 x 60% x 60% = £8,640. Carrying amount of remaining computers is therefore 150,000+ 34,600- 8,640 = £175,960. Depreciation on these is (175,960 x 40%) = £70,384 (3)
Alex plc is preparing its income statement for the year ended 31 December 2024.
On the initial trial balance at that date administrative expenses have a debit balance of £684,000 before accounting for depreciation and profits/losses on disposal in respect of the company’s computer equipment.
At 31 December 2023 Alex plc had computer equipment that cost £1,004,408, all of which had been purchased on 1 January 2022, and it had accumulated depreciation of £697,600.
A computer system costing £6,800 was sold on 1 January 2024 for £1,800. Computer equipment is depreciated monthly over four years.
The amount to be disclosed as administrative expenses in Alex plc’s income statement for the year ended 31 December 2024 is?
Select ONE answer:
£933,402
£935,002
£936,702
£963,702
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
Not correct
Correct – In respect of the disposal, the computer sold had a carrying amount of £6,800/4 x 2= £3,400 at 1 January 20X4, so a loss of (3,400–1,800) = £1,600 arises on disposal. The remaining computers have a cost of £997,608 (1,004,408 -6,800). We know that none of them was written down fully at the previous year end, and we can assume there have been no additions, so depreciation of £997,608/4 = £249,402 arises.
This multiple-choice question is suitable for Accounting KS5 classes.
The answer is 1
Correct – VAT is not treated as input tax when a car is purchased for use in a business (as opposed to being bought as inventory by a car dealer). As Alex plc is a retailer, we can assume that the gross figure should be taken as the cost of both vehicles. The old car had been depreciated for 28 months when it was traded in.
This multiple-choice question is suitable for Accounting KS5 classes.
The answer is 3
Not correct
Not correct
Correct – VAT on vehicles except for cars is treated as input tax, so the truck’s cost in the ledger accounts is £99,640 x 40/47 = £84,800 (B). This is depreciated at 20% per annum for 6 months, a charge of £8,480. Hence the carrying amount at the year-end is £84,800- £8,480 = £76,320
Alex plc acquired a machine on 31 March 2024, its year end, for £196,600.
It gave the seller a cheque for £110,000 and handed over an old machine with a carrying amount at that date of £34,400.
This machine had cost £60,000. A further sum of £42,000 was then due to the supplier the machine as the final payment.
The only entries made before the initial trial balance was drawn up were to credit cash £110,000 and credit other payables £42,000.
As well as crediting Suspense with £152,000, which of the following sets of adjustments should be made on the extended trial balance to reflect the purchase and disposal in Alex plc’s financial statements?
This multiple-choice question is suitable for Accounting KS5 classes.
The answer is 4
Not correct
Not correct
Not correct
Correct – The accumulated depreciation at the part exchange date is (60,000 – 34,400) = £25,600, and this must be eliminated from the accumulated depreciation account by debiting the account. The machine cost account is debited with the difference between the cost of the old and new machines (196,600 – 60,000) = £136,600. Alex plc is paying a total cash/payables figure of (110,000 + 42,000) = £152,000 for the machine, therefore the part-exchange allowance is (196,600 – 152,000) = £44,600. This is compared to the carrying amount of £34,400 to give a gain on disposal of £1 0,200. DR Accumulated depreciation £25,600 DR Cost £136,600 CR Disposal £10,200 CR Suspense £152,000
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