Tag: Depreciation

Alex Trading plc purchased a car for £18,000 on 1 January 2020.

The car was traded in on 1 January 2022.

The new car has a list price of £30,000 and the garage offered a part-exchange allowance of £5,000.

The company provides depreciation on cars using the reducing balance method at a rate of 25% per annum.

What loss on disposal will be recognised in the income statement of Alex Trading plc for the year ended 31 December 2022?

Select ONE answer:

1. £5,125
2. £8,500
3. £10,125
4. £11,175

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 75% x 75%- 5,000 = £5,125 loss
2. Not correct
3. Not correct
4. Not correct

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A car has a list price of £23,500, but the garage gives Alex Trading plc a 10% trade discount.

In settlement the garage accepts a cheque for £18,000, together with an old company car.

The amount to be capitalised by Alex Trading plc for the new car is?

Select ONE answer:

1. £16,200
2. £18,000
3. £21,150
4. £23,500

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. Correct – £23,500 × 90% = £21,150
4. Not correct

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

Alex Trading plc purchased a van on 1 October 2023 for a total cost of £22,000 by paying £17,500 cash

and trading in an old van.

The old van had cost £20,000 and the related accumulated depreciation was £14,200.

The loss on disposal in Alex Trading plc’s income statement for the year ended 31 December 2023 is?

Select ONE answer:

1. £1,300
2. £2,000
3. £2,500
4. £5,800

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 – Cost £20,000 – Depreciation £14,200 – Trade in Allowance (£22,000 – £17,500) = Loss of £1,300
2. Not correct
3. Not correct
4. Not correct

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

Alex Trading Ltd buys a machine on 31 August 2019 for £22,000.

It has an expected life of seven years and an estimated residual value of £1,000.

On 30 June 2023 the machine is sold for £9,000.

Alex Trading Ltd’s year-end is 31 December.

Alex trading Ltd’s accounting policy is to charge depreciation monthly using the straight-line method.

The loss on disposal of the machine which will appear in the income statement for the year ended 31 December 2023 is?

Select ONE answer:

1. £1,000
2. £1,500
3. £3,500
4. £5,800

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 – Cost of asset = £22,000 – Accumulated depreciation (46 months x (21,000/84)) = £10,500 the carrying amount at date of disposal less Proceeds on disposal £9,000 = Loss on disposal £1,500
3. Not correct
4. Not correct

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