Tag: Financial Accounting

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:

1. £933,402
2. £935,002
3. £936,702
4. £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

1. Not correct
2. 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.
3. Not correct
4. Not correct

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Alex plc, a retailer, depreciates all vehicles monthly over five years.

On 31 October 2019 Alex plc bought a car at a cost of £18,000 plus VAT, trading in an old car that had cost £16,800 including VAT on 1 July 2017.

A cheque for £13,500 was also handed over. VAT is at a rate of 17.5%.

In respect of this disposal in its income statement for the year ended 31 December 2019 Alex plc will show a loss of?

Select ONE answer:

1. £1,310
2. £2,430
3. £4,460
4. £5,580

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 – 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.
2. Not correct
3. Not correct
4. Not correct

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

Alex plc has the following information in its financial statements relating to fixtures and fittings as at 31 December:

2019   2018

£   £

• Cost   600,000   480,000
• Accumulated depreciation   180,000   218,000
• Carrying amount   420,000   262,000

During the year to 31 December 2019, the following transactions occurred in relation to fixtures and fittings:

• Additions £284,000
• Sales proceeds from disposals £178,800
• Depreciation charge £66,400

What is Alex plc’s profit or loss on disposals of fixtures and fittings in the year ended 31 December 2019?

Select ONE answer:

1. £119,200 loss
2. £119,200 profit
3. £196,800 profit
4. £196,800 loss

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
3. Not correct
4. Not correct

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