Tag: Financial Accounting

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.

Alex Trading plc purchases a machine for £15,000 on 1 January 2023.

After incurring transportation costs of £1,300 and spending £2,500 on installing the machine, it breaks down and costs £600 to repair.

Depreciation is charged at 10% per annum.

At what carrying amount will the machine be shown in Alex Trading plc’s statement of financial position at 31 December 2023?

Select ONE answer:

1. £13,500
2. £14,670
3. £16,920
4. £18,800

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 3

1. Not correct
2. Not correct
3. Correct – Cost (15,000 + 1,300 + 2,500) = £18,800 == > Depreciation (10% x £18,800) == > Carrying amount £16,920
4. Not correct

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