Accounting for non-current assets

A computer that was used as a demonstration item for customers was classified as capital expenditure. By the year end, a customer had bought the computer as part of the normal trading activities of the business. Which accounting entries are required to adjust the cost of sales?

Feb/March 2016

For what reason is depreciation charged on non-current assets?

Feb/March 2016

The details below refer to the disposal of a non-current asset: profit on disposal: $5200 cost of non-current asset sold: $14400 sales proceeds: $6800 What was the accumulated depreciation for the non-current asset sold?

Feb/March 2016

Omar wants to become a trader. He chooses to purchase an existing business in a favourable location. The price he pays for the business is greater than its net asset value. In the records of the new business, how is the additional amount paid shown?

Feb/March 2016

A partnership raises the valuation of its non-current assets. What ledger entries should be made to record this?

Feb/March 2017

Which item ought to be classified as capital expenditure?

Feb/March 2017

A business acquired a vehicle for $23500 during the year ended 31 December 2012. It was then disposed of on 30 September 2015 for $3500. Depreciation was recorded at 20% per annum by the straight line method. In both the year of purchase and the year of disposal, depreciation for a complete year was charged. What was the profit or loss on disposal of the vehicle?

Feb/March 2017

King supplied the details of non-current assets at 1 April 2015, along with the transaction information for the year.

Feb/March 2017

Which accounting concepts are relevant to depreciation?

Feb/March 2018

On 1 January 2015, a motor vehicle was bought for $\$12000$. Its estimated residual value was $\$7000$, and its expected life was 5 years. Depreciation was worked out month by month using the straight-line method. The vehicle was disposed of on 30 June 2017, resulting in a loss on disposal of $\$2560$. What amount was received as the sale proceeds?

Feb/March 2018

The information below concerns a motor vehicle that was part-exchanged for a new vehicle during the year. cost of old vehicle $\$20000$ accumulated depreciation at the date of sale $\$8000$ profit on disposal $\$3000$ cost of new vehicle $\$25000$ The remaining amount due for the new vehicle was settled from the business bank account. How much was paid from the bank account?

Feb/March 2018

For what reason is depreciation charged on non-current assets?

Feb/March 2019

A company bought an asset for $100000. Its useful life was five years and its estimated residual value was $20000. The company applies straight-line depreciation. At the end of the five-year period, the asset was sold for $5000. What is the combined impact on year five profits of both the depreciation charge and the sale of the asset?

Feb/March 2019

A business gives the following figures: cheque paid in 2018 for equipment bought in 2017 $15000; equipment bought on credit in 2018 $42000; net book value of equipment at 1 January 2018 $83000; net book value of equipment at 31 December 2018 $67000. What was the depreciation charge in the income statement for the year ended 31 December 2018?

Feb/March 2019

Daphne purchases a non-current asset for $10000. Its estimated useful life is two years, and its scrap value is $2000. She is deciding whether to depreciate it by the straight-line method or to apply the reducing balance method at a rate of 60% per annum. Which statements are correct?

Feb/March 2019

The costs listed below for a business are connected to a machine that has just been bought. Which of these costs would count as capital expenditure?

Feb/March 2020

The data given is: Freehold premises, cost: $125000 Provision for depreciation of freehold premises: $50000 After revaluation, the premises were valued at $180000. Which journal entries are needed to record the revaluation?

Feb/March 2020

A business has a year end date of 31 December. It bought a motor vehicle on 1 January 2017 for $15000. The motor vehicle was then sold on 31 March 2019 for $8000. Depreciation is worked out at 20% each year by the reducing balance method on a month by month basis. What is the accumulated depreciation and profit or loss on disposal of the motor vehicle?

Feb/March 2020

A business makes provision for depreciation when it accounts for non-current assets.

Feb/March 2020

On 1 May, Tom sold an old motor vehicle that had a net book value of $10000 to Arnold for $12000. Arnold paid $7500 by cheque and accepted that the remaining amount would be settled by instalments. What was the net effect of these transactions on Arnold’s accounting equation on 1 May?

Feb/March 2021

Which item is excluded from the capital cost of a new machine?

Feb/March 2021

For what reason does a business charge depreciation on its non-current assets?

Feb/March 2021

A company’s motor vehicles had a net book value of $312000 at the start of the year and $305000 at the year end. Over the year, an old vehicle was exchanged in part payment for a new vehicle. The part exchange value for the old vehicle was $8000. The balance of the purchase price of the new vehicle, $30000, was settled by cheque. What was the depreciation charge for the year?

Feb/March 2021

Myra runs a delivery business. The information below relates to her business’s delivery vehicles. Vehicles are depreciated by the straight-line method at $20\%$ per annum. Depreciation is calculated month by month. The business’s financial year end is 31 December.

Feb/March 2021

A limited company showed these balances on 1 January 2021: Revaluation reserve: $20\,000. Retained earnings: $142\,000. Profit for the year ended 31 December 2021 amounted to $105\,000. The $20\,000 revaluation reserve had been set up two years earlier from a revaluation of a property. That same property was revalued again on 31 December 2021, resulting in a revaluation loss of $35\,000. An interim dividend of $40\,000 was paid on 1 August 2021. A final dividend of $55\,000 was proposed on 31 December 2021. What was the amount of retained earnings at 31 December 2021?

Feb/March 2022

Which item is an instance of capital expenditure?

Feb/March 2022

On 1 July 2021, Tim purchased a delivery van for $10000. In addition, he spent $900 to install racks inside it, and $800 on insurance for one year. Tim charges depreciation at a rate of $10\%$ per annum. The year of purchase includes a full year's depreciation. What was the total amount of expenses shown in Tim’s income statement for the van for the year ended 30 September 2021?

Feb/March 2022

A business's year end is 31 December. It bought a non-current asset on 1 January 2020 for $100000. The asset was depreciated by the reducing balance method at $20\%$ per annum. It was then sold for $40000 on 1 January 2022. What was the loss on disposal?

Feb/March 2022

A business has recorded a vehicle purchase as a vehicle repair by mistake. In the year of purchase, the business does not charge depreciation on assets. What effect does this error have on the financial statements?

Feb/March 2023

At the close of Year 1, non-current assets were shown at cost, $500\,000, and carrying amount, $360\,000. In Year 2, some assets were disposed of. Their original cost was $100\,000 and accumulated depreciation was $40\,000. The depreciation expense for the other non-current assets in Year 2 amounted to $30\,000. What was the carrying value of non-current assets at the end of Year 2?

Feb/March 2023

Jakoub runs a restaurant. Its financial year ends on 31 December. The business owns numerous small pieces of kitchen equipment.

Feb/March 2023

What features do non-current assets have?

Feb/March 2024

At the start of the financial year on 1 January, a business bought a new motor vehicle for $34\,000. By mistake, it was entered in the motor expenses account. Motor vehicles are depreciated by the reducing balance method at $30\%$ per annum. The motor vehicle is expected to have a residual value of $4\,000 at the end of its useful life. If this mistake is left uncorrected, what impact will it have on the profit for the year ended 31 December?

Feb/March 2024

A company bought a machine on 1 April 2021 for $25\,000. It was depreciated at $20\%$ per annum by the straight-line method. A full year’s depreciation is charged in the year of purchase, but none is charged in the year of sale. The machine was sold for $12\,500 on 30 June 2023. The company’s year end is 31 December. What was the profit or loss on disposal of the machine?

Feb/March 2024

Zainab applies the straight-line depreciation method to business vehicles. The business’s non-current assets consist of two vehicles. Vehicles lose 20% per annum through depreciation. In the year of acquisition, depreciation is worked out on a month-by-month basis. No depreciation is charged in the year of sale/disposal. The financial year finishes on 31 December.

Feb/March 2024

The business incurs the following costs in connection with a machine that has just been bought. Which of these costs should be classed as capital expenditure?

Feb/March 2025

Leandro has possessed a delivery van for several years and has charged depreciation on it every year. In what way should he enter the provision for depreciation?

Feb/March 2025

A business writes off its motor vehicles at 20% per annum by means of the straight-line method, with depreciation being applied month by month. On 30 June in the current financial year, a new van was bought for $20000. An old van that had cost $18000 and had been purchased at the start of the previous year on 1 January was taken in part exchange for $14000. The remaining amount was settled by cheque. What is the total fall in profit for the current financial year ended 31 December caused by this?

Feb/March 2025

The table sets out selected figures taken from a business's statements of financial position. Non-current assets (at cost): 2014 $190000$, 2015 $245000$ Less accumulated depreciation: 2014 $75000$, 2015 $90000$ Net book value: 2014 $115000$, 2015 $155000$ Additional information for the financial year 2015 is given below: Depreciation charged: $40000$ New non-current assets bought (at cost): $105000$ Loss on sale of non-current assets: $10000$ What amount was received from the sale of the non-current assets?

May/June 2016

What items would count as part of the capital cost when a building is purchased?

May/June 2016

The company’s financial year finishes on 31 December. On 1 April 2015, these payments connected with a new machine were made: purchase cost $50000 and installation $10000. Machinery is depreciated at 20% on cost per annum, with the calculation starting from the date of purchase. Calculate the depreciation of the new machine for the year ended 31 December 2015?

May/June 2016

On 1 January 2012, a business bought a motor vehicle for $24000. Its expected useful life was four years, and its estimated residual value after four years was $8000. The business charges depreciation on motor vehicles at 25% per annum by the reducing balance method. No depreciation is charged during the year of disposal. The motor vehicle was sold on 31 July 2015 for $12000. What was the profit made on the sale of the motor vehicle?

May/June 2016

A building was bought for $500000. In addition, the following expenses were incurred: $50000 for adapting the new building, $5000 in legal fees for the purchase of the building, $4000 to clean the building, and $20000 for the building manager’s salary. What was the capital cost of the building?

May/June 2016

The table presents selected figures taken from a business's statements of financial position. Additional information for the financial year 2015 is given below. What amount was received from selling the non-current assets?

May/June 2016

Which of the following would be counted as part of the capital cost of buying a building?

May/June 2016

Miu is a sole trader and draws up her financial statements to 31 May each year. She charges depreciation on her motor vehicles by the reducing balance method at a rate of $20\%$ per annum. Depreciation is recorded each month.

May/June 2016

Why does a business record depreciation on its non-current assets?

May/June 2017

How do you calculate depreciation by using the straight-line method?

May/June 2017

A business writes off its machinery at 10% per annum by the straight-line method, working on a month-by-month basis. The business’s financial year end falls on 30 June. Machinery that cost $6600 on 1 April 2014 was disposed of on 30 November 2015. The profit on sale was $350. What was the sale proceeds?

May/June 2017

The table below gives details of a business’s non-current assets: net book value at beginning of year: $28000 net book value at end of year: $25000 depreciation charge for the year: $4000 disposals at net book value: $9000 Calculate the cost of the additions in the year.

May/June 2017

Which statement explains how purchased goodwill is treated in the accounts of a limited company?

May/June 2017

Amitav bought a van for $20000. As part exchange, he gave an old van whose net book value was $8000. The profit on disposal was $1500. What was the cash outflow from the purchase?

May/June 2017

On 1 January 2016, a company’s non-current assets had a net book value of $100000, and this reduced to $80000 by 31 December 2016. In 2016, assets with a book value of $20000 were sold and a profit on disposal of $5000 was earned. Depreciation charged in 2016 totalled $8000. What was the expenditure on new assets in 2016?

May/June 2017

Which statements give reasons for charging depreciation on a non-current asset?

May/June 2017

A trader purchased a machine on 1 January 2015. He charged depreciation on it at $10\%$ per annum by the straight-line method, and he disposed of it on 1 January 2017 for $\$4000$. The profit on disposal was $\$200$. What was the machine's cost on 1 January 2015?

May/June 2017

The data below refer to non-current assets. net book value at 1 January 2016: $\$20000$ net book value at 31 December 2016: $\$18000$ receipts from disposals: $\$3500$ assets bought: $\$9700$ loss on disposal: $\$650$ Calculate the depreciation charge for the year.

May/June 2017

The statements below are about a revaluation account. 1. A credit-side entry in the revaluation account indicates that a non-current asset has decreased in value. 2. If a credit entry is needed to balance the revaluation account, there is a profit on revaluation. Which row is correct about these statements?

May/June 2018

A company bought a new machine for $\$110000$ and expected it to last for 10 years. The machine was assumed to have a residual value of $\$10000$. The company applies the straight-line method of depreciation and charges depreciation in full in the year of purchase and sale. At the end of its life, the machine was sold for $\$20000$. Which statement is correct?

May/June 2018

A new business has a number of building-related costs. Which of these costs count as revenue expenditure?

May/June 2018

Which of the following would not lead to goodwill?

May/June 2018

X and Y had already been partners for several years when Z joined the partnership as a partner. On that date, after a revaluation, the premises account was debited with $120000$. Profits were divided equally both before Z joined and after Z’s admission. What were the credit entries used to record the revaluation?

May/June 2018

Adam’s financial year finishes on 31 December 2017. At 1 January 2017, the machinery had a net book value of $20000. On 30 June 2017, he bought a new machine for $6000. He paid 50% of the cost in cash and the remainder by part exchange of an old machine, whose net book value on that date was $2500. He charges depreciation on machinery at 20% per annum on the net book value, using a time basis. What is the net book value of the machinery shown in the statement of financial position on 31 December 2017?

May/June 2018

A business’s accounting year-end falls on 31 March. It bought a car on 1 April 2014 for $15000. The car was then sold on 30 September 2017 for $5000. Depreciation is applied at 20% per annum. In the year of purchase, a full year’s depreciation is charged. No depreciation is charged in the year of sale. What was the profit or loss on disposal?

May/June 2018

For what reason is depreciation charged on non-current assets?

May/June 2018

The net book values of a company’s non-current assets were as follows. On 1 January 2017, they stood at $20000$. By 31 December 2017, they had reduced to $15000$. Throughout 2017, non-current assets costing $7000$ were purchased. Non-current assets were disposed of, giving rise to a profit of $1000$. The depreciation charge for 2017 amounted to $8000$. What were the disposal proceeds of the assets sold?

May/June 2018

Which expenditures can be capitalised as land and buildings?

May/June 2018

FA Limited's accounting records at 1 January 2016, along with further information on the purchase, depreciation and disposal of motor vehicles.

May/June 2018

Butler runs a small business and has supplied information about non-current assets.

May/June 2018

X and Y had already been in partnership, with profits and losses divided equally between them. On 1 July 2018, Z joined as a partner and the three partners then shared profits and losses equally. On that date, the assets were revalued and a revaluation profit of $36000$ arose. What accounting entries were required to record the revaluation profit?

May/June 2019

Why is depreciation charged on non-current assets?

May/June 2019

A business reported the net book value of motor vehicles as shown below: 31 December 2017: $238000 31 December 2018: $243000 In the year ending 31 December 2018, one new motor vehicle was bought for $47000. Another motor vehicle, which had cost $53000 and had accumulated depreciation of $31000, was sold for $7000. What was the depreciation charge for motor vehicles for the year ending 31 December 2018?

May/June 2019

A business whose year-end is 31 December bought a motor vehicle on 1 January 2015 at a cost of $24000. The motor vehicle had an estimated useful life of four years, and its estimated residual value after four years was $8000. The business writes off motor vehicles at 25% per annum by means of the reducing balance method. In the year of disposal, no depreciation is charged. The motor vehicle was disposed of on 31 July 2018 for $12000. What was the profit on the sale of the motor vehicle?

May/June 2019

What factors lead to depreciation in non-current assets?

May/June 2019

June bought a new machine. She charged depreciation on it at a rate of $40\%$ per annum by the reducing balance method. At the end of two years, its net book value was $3600. What was the purchase price of the machine?

May/June 2019

The data below concern the motor vehicles of a business. Net book value on 1 January 2018 stood at $398\,000, and on 31 December 2018 it stood at $480\,000. The following took place during 2018. 1. Extra motor vehicles with a cost of $195\,000 were bought. 2. A motor vehicle (original cost $80\,000) was disposed of for $24\,000, making a profit of $2000. What was the depreciation charge for 2018?

May/June 2019

Why is depreciation charged on a non-current asset?

May/June 2019

A business has an accounting year that finishes on 31 December. An office building with a useful life of 40 years was bought on 1 January 2010 for $400\,000$. Its residual value is expected to be nil. Depreciation is calculated by the straight-line method. On 1 January 2018, the office building was revalued to $480\,000$. What is the net book value of the office building on 31 December 2019?

May/June 2019

A new machine is bought for $75\,000$. On top of this, delivery and installation costs are $2\,500$. The business charges depreciation on all non-current assets at $20\%$ per annum by the straight-line method. What amount would depreciation reduce the profit for the year by?

May/June 2019

What features do non-current assets have?

May/June 2020

The business’s financial year ends on 31 December. Its motor vehicles are depreciated over four years by the straight-line method. In the year of purchase, depreciation for a complete year is charged, while no depreciation is charged in the year of sale. A motor vehicle bought on 1 July 2016 for $18000 had an estimated residual value of $4000. It was sold on 31 December 2019 for $5000. What profit or loss resulted from the disposal?

May/June 2020

The information below relates to the purchase of a new machine. Machine cost $80000 Less 10% trade discount $8000 Cost after discount $72000 Delivery cost $1200 Installation cost $1800 Annual maintenance cost $4000 The business intends to keep the machine for 5 years. It is predicted to be sold for $5000. What will be the annual depreciation charge using the straight-line method?

May/June 2020

A business charges depreciation on its non-current assets. It then records them in the statement of financial position at net book value. Which accounting concept is the business applying?

May/June 2020

On 1 April 2017, a company bought a machine for $25000. It was depreciated by $20\%$ each year using the straight-line method. Depreciation for a complete year is recorded in the year of purchase, but no depreciation is recorded in the year of sale. The machine was sold on 30 June 2019 for $12500. The company's year-end is 31 December. What was the profit or loss on disposal of the machine?

May/June 2020

Why do businesses apply depreciation to their non-current assets?

May/June 2020

What characteristics do non-current assets have?

May/June 2020

A business has a year end of 31 December. Its motor vehicles are depreciated over four years by the straight-line method. In the year of purchase, depreciation for a full year is charged, whereas no depreciation is charged in the year of sale. A motor vehicle bought on 1 July 2016 for $18000 had an estimated residual value of $4000. The motor vehicle was then sold for $5000 on 31 December 2019. What was the profit or loss on disposal?

May/June 2020

The details below relate to the purchase of a new machine. The business intends to retain the machine for 5 years. It is anticipated that it will be sold for $5000. What is the annual depreciation charge by using the straight-line method?

May/June 2020

Q Limited is a small wholesale business. It applies the reducing balance method of depreciation to its delivery vehicles.

May/June 2020

Marek purchased some machinery on 1 January 2020. The total amount he paid was $50000. A sum of $6000 of this amount was for maintenance of the machinery up to 31 December 2022. Marek charges depreciation on his machinery at $10\%$ per annum. In Marek’s financial statements for the year ended 31 December 2020, how should the expenditure be shown?

May/June 2021

Which of the following statements about depreciation are correct?

May/June 2021

An item of revenue expenditure is misclassified as capital expenditure. What effect does this error have?

May/June 2021

Which statement about depreciation is not correct?

May/June 2021

Arnaud had a vehicle that was first purchased for $20000. In the year ending 31 May 2021, he spent $3700 on repairs and recorded depreciation of $4000. At 31 May 2021, the vehicle’s net book value stood at $12000. Arnaud disposed of the vehicle on that date, and the loss on disposal was $2500. What were the cash inflows and outflows associated with the vehicle in the course of the year?

May/June 2021

Two years earlier, a business bought two machines at a price of $25000 each. In the third year, one machine, which had a net book value of $16000, was sold. Another machine costing $30000 was bought. Depreciation is charged at 20% per annum by the reducing balance method on all assets owned at the end of the accounting period. What was the depreciation charge for the third year?

May/June 2021

A trader bought fixtures and fittings on credit from a supplier. They were defective and were sent back to the supplier. Which entry in the trader’s books of account showed the return?

May/June 2021

A business bought a pocket calculator for the book-keeper to use. The accountant recorded it as an expense in the income statement. Which accounting concept is applied?

May/June 2021

A business bought a machine and made these payments: machine cost $7500; alterations to improve efficiency $1200; insurance for $12$ months $400; installation costs $800. What amount should be recorded as the machine’s cost in non-current assets?

May/June 2021

A business ended its financial year on $31$ December $2020$. On $1$ September $2020$, it disposed of an old motor vehicle and acquired a replacement. How were these entries shown in the provision for depreciation account on $1$ September $2020$?

May/June 2021

In the year ending $31$ December $2017$, a business bought a vehicle costing $23500$. It was then sold on $30$ September $2020$ for $3500$. Depreciation was recorded at $20\%$ per annum by the straight-line method. A full year’s depreciation was charged in both the year of purchase and the year of disposal. What was the profit or loss on disposal of the vehicle?

May/June 2021

Which accounting concepts do not provide reasons for recording depreciation in the income statement?

May/June 2022