Tag: Financial Accounting

An asset was purchased by Alex Trading plc on 1 January 2021 for:

• Cost – £1,000,000
• Annual licence fee – £15,000
• Total – £1,015,000

The business adopts a date of 31 December as its reporting year end.

The asset was traded in for a replacement asset on 1 January 2024 at an agreed value of £500,000.

It has been depreciated at 25% per annum on the reducing-balance method.

What figure is included regarding this disposal in the income statement for the year ended December 2024?

Select ONE answer:

1. £25,000 profit
2. £78,125 profit
3. £62,500 loss
4. £250,000 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 – £ Cost 1,000,000
   • 2021 Depreciation – £250,000 NBV 750,000
   • 2022 Depreciation – £187,500 NBV 562,500
   • 2023 Depreciation – £140,625 NBV 421,875
   • 2024 Part Exchange – £500,000 Profit £78,125
3. Not correct
4. Not correct

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Which of the following is excluded from the cost of a tangible non-current asset?

Select ONE answer:

1. Site preparation costs
2. Legal fees
3. Costs of a design error
4. Installation costs

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 – Any abnormal costs are not directly attributable to the asset and therefore should not be capitalised.
4. Not correct

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

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

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

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.