3 A company has two non-currant assets.

Oelais are as folows:

cost residual
asset dale bought depreciation method
$ value

X 1 Jan 2018 10000 stralghUine life 5years $2000

y 1 Jan 2018 20000 reducing balance I
rate 20% nll

What wa the total depreciation c:halge in the income statement for the year anded
31 Oecambar 2019?
A $4800 B $5200 C $5600 D $8000

4 A business purchased a,_ machine on 1 January 2020 for $15000 paying $10000 by cheque.

The balance was settled by part exchange of an old machine. This old machine had cost $12000
on 1 Janua,y 2018 and had been expected to last for 6 years with a residual value of $2400.

The business uses the straight-line method of depreciation.

Whal was the loss on the disposal of the old machine?

A $1400 B $3000 C $3800 D $4600

3 A company purchased a machine on 1 Apri 2017 for $25000. It - depreciated at 20% per
annum using the straight-line method. A ful year's depreciation Is charged In the ye.- ol
purchase but none In the ye• of sale. On 30June 2019 the machine - sold for $12500. The
company year-end Is 31 December.

What - the profit or Ion on the cbposal of the machine?

A $1250 lou
B $1250 profit
C $25001ou
D $2500 profit

4 Why do businesses charge depreciation on their non-current auets?

A to ensure that sufficient cash Is available to replace the assets
B to show the realisable value of the assets In the slatement of financial position
C to spread the cost of the assets over their estimated useful ife
D to show when the assets must be replaced
3 A- has• - y e a r end ol 31 December.
It depr9CiaCes Its madllnery on a monttH,y-monlh basis. It UMS the atralght-Une method at
10%per-.

It boughl • machine, cost $12000, on 1 .lan<ay 2019 and IOld an 31 March 2020.

-- --
Which - . relating ID lhla machine - - in the P , - . for depredation of machinery
account for the - ended 31 Dec.- 2020?

s s
A 300 1500
8 no entry 1200
C 1200 no entry
D 1500 300

4 A a non-current - 1 for $500000 with an expected life ol 20 years, Mar

that lime k was expected to be IOld for $100000. It was deprec:ialed using the llraiglll-line
method.
The non<1.1"9fll - I waa sold after 10 years for $120000 wilh Mtling c:oala of S10000.

Whal waa the loss an dlapoul?

A $130000 8 $140000 C $180000 D $190000

4 The following inlonnalion is available in respect ol lhe purchase ot a new machine.

s
machine cost 80000
leu 10% trade discount 8000
72000
deliwtycost 1200
instalation cost 1800
annual maintenance cost 4000

The business plans to keep the machine for 5 ye-.. It Is expected to be sold for $5000.
Whal wil be the aMual depreciation charge using the straight-line method?

A $13400 B $14000 C $14800 D $15600

3 A business has a year end of 31 December. II depreciates its motor vehicles over four years
using the straight-line method. A full year's depreciation is chalged in the year of purchase, but
none in the year ot sale.

A motor whide purchased on 1 July 2016 for $18000 had an estimated residual value of $4000.
The mo1or vehicle was sold for $5000 on 31 December 2019.

What was the pn,fit or loss on disposal?

A $1000 loss
B $1000 profit
C $25001oss
D $2500 profit
:, Paul has a year end of 31 December.

On 1 January 2020, he bought a non-current asset for S10000. He sold ii.., 1 January 2021 for
$8500.

Paul usually provides depradation at the rate of 1O'JI. pet annum. A run year'• depradation la
cll8lged In the year of aoqulaltion and none In the yes of dlapoael. Ha forgot lo provide for any
depredation on lhla non-current asset.

What was the affect of lhla enor on Paul's profit for the year ended 31 December 2021?

A S1000 higher
B S1000 lower
C S1500 higher
D S1500 lower

4 A business depreciates Its machinefy at 1O'JI, pet annum uaing the alnllghUine method on a
month-by-month beala. The business's financial year end is 30 June.

Machlne,y which had cost $6600 on 1 April 2020 was sold on 30 November 2021. The profit on
sale was S350.

What_,. the aale proceeda?

A $5150 a S5425 C $5850 D $6125

3 A company sold one of ila deliw,y vehicle• for $2800 after two years of use. The original coat of
the vehicle w.,. $6500. The company depreciatea i1a vehicles al 30'J1, pet annum using the
reducing balance method.

What was the profit or loss on cisposal?

A lossS200
a tossS385
C proftt$200
D profit$385

4 A trader depreciates loose - using the revaluation method.

Which account Is credited at the end of the year lo record depreciation on loose tools?

A depreciation of loose tools

B disposal
C loose tools
D provision for depreciation of loose tools

5 The motor vehicles at cost account had a balance of S90 000 at the beginning of the year on
1 January.

On 1 September In the same year, the following transactions took place.

A motor vehicle was disposed of. The vehicle had been purchased in the previous
year for $21 000.
2 A new motor vehicle was purchased at a cost of S24 000.

Depreciation is calculated al 20'JI, using the straight~ine method. Deprac:iation is cll8lged on a

month-by-month basis for each month the motor vehicle is owned.

What was the depreciation charge for the year ended 31 December?

A $15400 a $18200 C $18600 D $22400

2 Which statements about the reducing balance method of depreciation are correct?

The annual percentage depreciation rate changes each year.

2 The amual depreciation charge remains the same each year.
3 The amual percentage depreciation rate remains the smne each year.
4 The amual depreciation charge fals each year.

A 1and2 B 1 and4 C 2and3 D 3and4

3 On 1 April 2021 a busiMss purchased a machine for $120000 with an estimated residual value
of$12000.

On 1 July 2022 Iha machine - • sold for $100 000.

Mac:Nnery is depreciated at the rate of 20% per annum using the atralght-llne method.
Depntclatlon is calculated for aach month of ownerahlp.

Whk:h entry ahould be made In the provision for depreciation ot machinefy accx,unt for Iha
disposal ot the machine?

A $21 600 credit

B $21 600 debit
C $27 000 cradit
D $27 000 debit

4 Sue purchased a n - machine. She depreciated at a rate ot 40% per &MUm using the
reducing balance method. MM two years its net book value was $3600.

Whal was the purchase price of the machine?

A S7056 B $9216 C $10000 D $22500

3 A cx,mpany purchased a vehicle for $30 000. It part-exchanged an existing vehicle at a value
ol $6500, with the balance being paid by cheque.

The part-eicchanged vehicle originally cost $12000 and had • net book vllkle ol $4800 on
disposal.

Which enlriel will be made In the accounts?

lnoome statement bank account

A S17001ncome motor vehicle at cost $23500 cndit

B S1700 expense motor vehicle at cost $30000 debit
C $5500 expense motor vehicle at cost $23 500 debit
D $5500 Income motor vehicle at cost $30 000 cndlt

4 Al 31 December 2021 • business had a - - , 1 asset with a net book value d $18000. It
had been purchased during the year ended 31 0-,,ber 2020.

Depu1ciatio11 is charged at a rate of 25% per amum using the radudng blllance method. A ful
year's depteciation Is charged In the year ol purchase.

What was 11w original cost of the non-aJITlll"II asset?

A $22500 B $24000 C $27000 D $32000

2 Phil purchased new premises and made the following payments.

s
preml- 60000
legal f - relating to purchase 2000
Insurance for the financial year 700

When recording the pun:hase of the premises, the legal fees and Insurance wera both treated
Incorrectly.

Phlrs accountlng policy Is not to charge deptec:iatlon on non-<:11rrent assets In the year of
purchase.

What was the effect of the errors on the profit for the yeal'?

A S1300overstated
B $1300 undenltated
C $2700 overstated
D $2700 understated

3 On 1 January 2019, a no~nent - t was purchased at a cost of $290000. Delivery and

Installation costs of $10000-re also paid.

The reducing balance method is used to depreciate the asset at a rate of 20% par annum. A full
year's depreciation la charged In the year of acquisition and none in the year of disposal.

On 31 December 2021, the non-current asset was sold for $205000. Dispoaal costs of $5000
-re also paid.

Whal was the profit on disposal?

A $8000 B $13000 C $14400 D $46400

4 A sole trader purchased a machine costing $30 000 with an estimated residual value of $5000. It
waa expected to have a useful life of five years.

At the end of the fourth year, the machine waa sold at a profit of $200.

Depreciation 11 charged Ullng the llralght-llne method. A full year'• depreciation is charged for
each year the aaset 11 owned.

What waa the amount of sale p,oceeda?

A $5200 B $6200 C $10200 D $15200

6 New equipment costing $40000. with an estimated residual value of $6000, was acquired at the
beginning of the year on 1 January.

On the same date the business made the following payments in respect of the equ.,,,_t.

$
delivery 5000
lnatalation 7000
8-year maintenance contract 8000

The equipment has an estimated tile of 8 years. The busiMss uses the straight-line method of
depreciation.

What would be the canying amount for this ttem at the end of the yea, on 31 December?
A $35750 B $46250 C $52500 D $53250