Accounting for depreciation and disposal of non-current assets

A farmer disposed of a plot of land for its market value. How ought the money received from this sale to be recorded?

Feb/March 2020

Why does a trader need to account for depreciation of a non-current asset?

Feb/March 2020

An item of equipment costing $20000 was bought on 1 January 2019. Its estimated useful life is 5 years and its residual value is $3000. The straight-line method of depreciation was charged in the income statement for the year ended 31 December 2019. It was later discovered that the reducing balance method at 30% per annum ought to have been applied. What effect did this error have on the profit for the year ended 31 December 2019?

Feb/March 2020

Why ought a manufacturer to include depreciation for her factory equipment?

Feb/March 2023

A manufacturer supplied the information below. On 1 January 2022: machinery recorded at cost $20 000; provision for depreciation of machinery $7 200; loose tools shown at valuation $2 100. Machinery is depreciated at $20\%$ per annum by the reducing balance method. Extra loose tools were bought in August 2022 for $300. No depreciation is charged on loose tools purchased in the financial year. On 31 December 2022, loose tools that were more than 12 months old were valued at $1 850. What was the depreciation charge for the year ended 31 December 2022?

Feb/March 2023

On 1 January 2022, a business purchased two assets, X and Y, at a cost of $2000 each. Asset X is depreciated at 10% per annum by the straight-line method, while asset Y is depreciated at 10% per annum by the reducing balance method. Which statements are correct?

Feb/March 2024

Simon acquired a new non-current asset. Why did he choose to depreciate it using the reducing balance method?

Feb/March 2024

Samuel launched his business on 1 January 2023 and purchased two delivery vans at $12000$ each. He charges depreciation on all vehicles at $10\%$ per annum, worked out monthly, by the straight-line method. On 1 April 2024, he disposed of one van and substituted it with a larger model that cost $24000$. What was the balance on the provision for depreciation of delivery vehicles account on 31 December 2024?

Feb/March 2025

A carpenter applies the revaluation method of depreciation to the hand tools used in the business. At the end of the financial year, every hand tool in use, including any bought during the year, is revalued. Fresh hand tools were bought during the year, but none of the hand tools were sold or otherwise disposed of. Which value of hand tools is used to show the calculation of depreciation for the year?

Feb/March 2025

Why does a business make provision for depreciation on non-current assets?

May/June 2021

Machinery that had originally cost $6\,290$ was disposed of for $3\,100$. The disposal account indicated a profit on disposal of $584$. What amount of depreciation had been charged up to the disposal date, and on which side of the disposal account was it entered?

May/June 2021

Sabeena operates a retail business and intends to shut it down in a few weeks. In the statement of financial position, how ought her fixtures and fittings to be valued?

May/June 2021

Why does a business make an allowance for depreciation on non-current assets?

May/June 2021

A machine whose original cost was $10\,000 was depreciated over two years at $10\%$ per annum on the straight-line basis. It was then sold for cash, and the loss on disposal was $700. On the same day, a replacement machine was purchased for $12\,400 cash. What was the net fall in the cash balance?

May/June 2021

Why do businesses make an allowance for the depreciation of non-current assets?

May/June 2021

A machine that originally cost $10000 had its value reduced for two years at 10% per annum on the straight-line basis. It was then sold for cash, with the loss on disposal equal to $700. On the same day, a replacement machine was purchased for $12400 in cash. What was the net fall in the cash balance?

May/June 2021

Atif charges depreciation on his motor vehicles at the rate of $20\%$ per annum by the reducing balance method. On 1 May 2021, Atif had motor vehicles that originally cost $35000$. By that date, the motor vehicles had accumulated depreciation of $12600$. What amount was in Atif’s provision for depreciation account balance on 1 May 2022?

May/June 2022

Yeung’s financial year finishes on 31 March. He bought a machine for $4000$ on 1 April 2021. He expected it to last for $3$ years in use and to have a residual value of $100$. Yeung applies the straight-line method of depreciation. The machine was then sold on 1 April 2022 for $1500$. Calculate the loss on disposal.

May/June 2022

Which statement concerning the reducing balance method of depreciation is incorrect?

May/June 2022

Yeung’s financial year finishes on 31 March. On 1 April 2021, he bought a machine for $4000. He judged that its useful working life would be 3 years and that its residual value would be $100. Yeung applies the straight-line method of depreciation. The machine was sold on 1 April 2022 for $1500. What was the loss on disposal?

May/June 2022

Which statement regarding the reducing balance method of depreciation is incorrect?

May/June 2022

Yeung's financial year finishes on 31 March. On 1 April 2021, he bought a machine costing $4000. He estimated that it would be useful for $3 years and that its residual value would be $100. Yeung applies the straight-line method of depreciation. The machine was sold on 1 April 2022 for $1500. What was the loss on disposal?

May/June 2022

Which statement regarding depreciation is correct?

May/June 2023

Rashid supplied these balances as at 31 December: - machinery at cost: $52000 - provision for depreciation of machinery: $23000 Depreciation for the year was worked out at 20% of cost and this is already included in the provision balance. Once the balances had been extracted, it was discovered that machinery repairs costing $2000 had been posted in error to the machinery account. What is the adjusted balance on the provision for depreciation of machinery account?

May/June 2023

Which group contains only intangible assets?

May/June 2023

Maya charges depreciation on her motor vehicle at $25\%$ per annum by the straight-line method. The motor vehicle had a cost of $15000. For the present financial year, depreciation was wrongly worked out at $15\%$ per annum. What effect will correcting this mistake have on the profit for the year?

May/June 2023

A business acquired two assets, X and Y, on 1 January 2022, at a cost of $2000 each. It charges depreciation on asset X at 10% per annum using the straight-line method, and on asset Y at 10% per annum using the reducing balance method. Which statements are correct?

May/June 2023

Ravi’s financial year finishes on 30 April. On 1 May 2020, Ravi purchased a motor vehicle for $8000, and on 1 May 2022 he disposed of it for $4050. Depreciation is charged using the reducing balance method at 20% per annum. What would be entered in the income statement for the year ended 30 April 2023 in respect of the disposal of the motor vehicle?

May/June 2023

Maya charges depreciation on her motor vehicle at $25\%$ per annum by using the straight-line method. The motor vehicle had a cost of $15000. For the current financial year, depreciation was calculated wrongly at $15\%$ per annum. What impact will correcting this error have on the profit for the year?

May/June 2023

On 1 January 2022, a business purchased two assets, X and Y, for $2000 each. Asset X is depreciated at $10\%$ per annum by the straight-line method, while asset Y is depreciated at $10\%$ per annum by the reducing balance method. Which statements are correct?

May/June 2023

Ravi’s financial year finishes on 30 April. On 1 May 2020, Ravi purchased a motor vehicle for $8000 and then sold it on 1 May 2022 for $4050. He applies the reducing balance method of depreciation at $20\% per annum. What amount would be shown in the income statement for the year ended 30 April 2023 in relation to the disposal of the motor vehicle?

May/June 2023

Stalla is a sole trader who sells on credit. She keeps a provision for doubtful debts at 4% of trade receivables. Stalla’s trade receivables were: At 31 December 2021 $75000 At 31 December 2022 $77000

May/June 2023

Mandeep writes off his motor vehicles at a rate of $20\%$ by using the straight-line method. In the year of purchase, a full year’s depreciation is charged. On 1 January 2017, Mandeep purchased a motor vehicle for $20000. He then acquired a second motor vehicle on 1 June 2020 for $10000. What amount was charged as depreciation on motor vehicles for the year ended 31 December 2020?

May/June 2024

On 1 January 2018, Elzevir bought a motor vehicle for $8000. Depreciation is charged at $40\% using the reducing balance basis. Which journal entry would record the depreciation for the year ended 31 December 2019?

May/June 2024

A trader disposed of one of his vehicles. What journal entry is made to remove the total depreciation on the vehicle disposed of?

May/June 2024

On 1 January 2018, Elzevir bought a motor vehicle for $8000. Depreciation is charged at $40\%$ using the reducing balance basis. Which journal entry should be used to record depreciation for the year ended 31 December 2019?

May/June 2024

A trader disposed of one of his vehicles. What journal entry should be made to eliminate the accumulated depreciation on the vehicle that was sold?

May/June 2024

Ahmed runs a trading business and prepares his financial statements to 31 December each year. He had some spare office space, so he chose to use part of it for inventory storage and to lease the remainder to Bilal. Bilal began renting the office space from Ahmed on 1 January 2023. The yearly rental amount is $4800. In 2023, Bilal paid these rent amounts into Ahmed’s bank account: 1 April $3600 30 September $2400 Ahmed disposed of old office equipment for $1350 on 3 January 2023, selling it on credit to Rahat. The equipment had originally cost $3200 on 1 January 2021. Ahmed charges depreciation at 25% per annum by the reducing balance method. He does not charge depreciation in the year when the asset is sold.

May/June 2024

Lottie operates as a trader. The end of her financial year falls on 30 April. She maintains her petty cash book under the imprest system. The imprest amount is $150. The totals of the payments analysis columns in her petty cash book for April 2024 are as follows: Cleaning $21 Stationery $47 Sundry expenses $44 In April 2024, Lottie was refunded $15 for damaged stationery, and this money went into petty cash. The petty cash book is classified as a book of prime entry. On 30 April 2024, Lottie disposed of a motor vehicle for $6000 on credit to Y Limited. She originally bought it on 1 May 2021 for $12 000. Lottie charges depreciation on vehicles at 25% using the reducing balance method. No depreciation is charged in the year the asset is sold. Lottie sells 3 different types of goods. Her inventory at 30 April 2024 is as follows: Type A: number of units 60, purchase price per unit $14, net realisable value per unit $20, carriage inwards per unit $1 Type B: number of units 85, purchase price per unit $17, net realisable value per unit $24, carriage inwards per unit $0 Type C: number of units 30, purchase price per unit $21, net realisable value per unit $22, carriage inwards per unit $2 Lottie pays $360 per annum for insurance. On 1 May 2023, insurance of $60 was prepaid. On 1 August Lottie paid $360 by bank transfer for the year 1 July 2023 to 30 June 2024.

May/June 2024

Atif charges depreciation on his motor vehicles at $20\%$ per annum by the reducing balance method. On 1 May 2024, Atif had motor vehicles that had originally cost $35000$. The accumulated depreciation for these motor vehicles was $12600$ on 1 May 2024. What balance will be shown in Atif’s provision for depreciation account on 30 April 2025?

May/June 2025

On 1 January 2023, equipment was bought for $50\,000. It is anticipated that the equipment will last for five years and will have a residual value of $10\,000. Depreciation is charged using the straight-line method. What was the balance on the provision for depreciation of equipment account at 31 December 2024?

May/June 2025

Atif writes off depreciation on his motor vehicles at 20% per annum by means of the reducing balance method. On 1 May 2024, the motor vehicles owned by Atif had originally cost $35000. Their accumulated depreciation stood at $12600 on 1 May 2024. What balance will be shown in Atif’s provision for depreciation account on 30 April 2025?

May/June 2025

Mo is a farmer. He draws up his financial statements to 31 December each year. He uses his delivery vehicle to take farm produce to his customers. Mo charges depreciation on vehicles at 20% per annum by the reducing balance method. In the year of purchase he charges a full year’s depreciation, and in the year of disposal he charges no depreciation. On 31 March 2024, he sold his delivery vehicle for $2 900 and was paid by cheque. He had bought this delivery vehicle in June 2021 for $10 000.

May/June 2025

Jasmine runs a consulting business. On 1 April 2024, the balances in Jasmine’s ledger accounts were as follows: Motor vehicles $16 000 Provision for depreciation of motor vehicles $7000 Trade receivables $12 220 Provision for doubtful debts $366 Rent (prepaid) $900 Rates (unpaid) $270 In the year ended 31 March 2025, Jasmine’s bank payments comprised: Motor vehicles $18 000 Rent and rates $14 960 Extra information: 1 Depreciation is to be calculated at 25% per annum by the reducing balance method. Vehicles bought during the year are to receive a full year’s depreciation. 2 Trade receivables at 31 March 2025 stood at $11 800. A further $300 remains to be written off as irrecoverable. 3 The provision for doubtful debts is to be kept at 3% of net trade receivables. 4 At 31 March 2025, prepaid rent amounted to $925 and rates owing were $185.

May/June 2025

Mo is a farmer. He prepares his financial statements to 31 December each year. He uses his delivery vehicle to take farm produce to his customers. Mo charges depreciation on vehicles at 20% per annum by the reducing balance method. In the year of purchase he records a full year’s depreciation, and in the year of disposal he records none. On 31 March 2024, he sold his delivery vehicle for $2900 and received payment by cheque. He had bought this delivery vehicle in June 2021 for $10 000.

May/June 2025

A trader uses the reducing balance method of depreciation. What impact will this have over the life of the non-current asset?

Oct/Nov 2020

At 31 December, Rashid gave the following details: - machinery at cost: $52\,000$ - provision for depreciation of machinery: $23\,000$ Depreciation for the year is worked out at $20\%$ on cost. After the statement of financial position had been prepared, it was discovered that machinery repairs costing $2000$ had been posted to the machinery account. What is the correct balance on the provision for the depreciation of machinery account?

Oct/Nov 2020

Zak has been charging depreciation on his machinery at $20\%$ per annum by the straight-line method. At $31$ December $2018$ the statement of financial position showed: - machinery at cost: $\$30000$ - depreciation to date: $\$12000$ - net book value: $\$18000$ On $31$ December $2019$ Zak was thinking about calculating the yearly depreciation at $20\%$ per annum on the net book value of the machinery. Which statement is true?

Oct/Nov 2020

At 31 December, Rashid gave the following figures: machinery at cost $52\,000$, provision for depreciation of machinery $23\,000$. Depreciation for the year is worked out at $20\%$ on cost. Once the statement of financial position had been drawn up, it was discovered that machinery repairs costing $2000$ had been entered in the machinery account as a debit. What is the correct balance in the provision for the depreciation of machinery account?

Oct/Nov 2020

A machine that had cost $32\,000$ was sold for $14\,000$. By the date it was disposed of, accumulated depreciation amounted to $15\,000$. What profit or loss arose on disposal?

Oct/Nov 2020

A trader applies the reducing balance method of depreciation. What impact will this have during the useful life of the non-current asset?

Oct/Nov 2020

Rashid gave the following details at 31 December. Machinery recorded at cost: $\$52\,000$. Provision for depreciation of machinery: $\$23\,000$. Depreciation for the year is worked out at $20\%$ on cost. Once the statement of financial position had been prepared, it was discovered that machinery repairs costing $\$2000$ had been entered to the debit of the machinery account. What is the correct balance in the provision for the depreciation of machinery account?

Oct/Nov 2020

Zak has charged depreciation on his machinery at 20% per annum by using the straight-line method. At 31 December 2018, the statement of financial position showed: - machinery at cost: $30000 - depreciation to date: $12000 - net book value: $18000 On 31 December 2019, Zak was thinking about working out the annual depreciation at 20% per annum based on the net book value of the machinery. Which statement is correct?

Oct/Nov 2020

Sariah owns a ladies’ clothing business and keeps her records using double entry bookkeeping. The following events took place in September 2020. 1 A motor vehicle was bought on credit from Sharpe Motors for $6350. 2 Ruhee, a credit customer, was declared bankrupt and still owed Sariah $1200. The debt is to be written off. Sariah is drawing up her financial statements for the year ended 30 September 2020. She gives the following details for fixtures and fittings. 2019 October 1 Fixtures and fittings at cost $28600 Provision for depreciation of fixtures and fittings $6185 2020 January 31 Fixtures were sold and a cheque for $1150 was received The fixtures had originally been bought on 1 February 2018 for $1500 March 31 New fixtures were purchased and paid for by cheque $3500 Sariah’s policy is to charge depreciation on fixtures and fittings at 10% per annum using the reducing balance method. Depreciation for a full year is charged in the year of purchase, but none is charged in the year of disposal.

Oct/Nov 2020

Sariah owns a ladies’ clothing business and keeps double entry bookkeeping records. The following events took place during September 2020. 1 A motor vehicle was bought on credit from Sharpe Motors $6350. 2 Ruhee, a credit customer, was declared bankrupt owing Sariah $1200. The debt is to be written off. Sariah is preparing her financial statements for the year ended 30 September 2020. She gives the following details for fixtures and fittings. 2019 October 1 Fixtures and fittings at cost $28600 Provision for depreciation of fixtures and fittings $6185 2020 January 31 Sold fixtures and received a cheque $1150 The fixtures had been purchased on 1 February 2018 for $1500 March 31 Bought new fixtures and paid by cheque $3500 Sariah’s depreciation policy for fixtures and fittings is 10% per annum using the reducing balance method. Depreciation is charged for a full year in the year of purchase, but none is charged in the year of disposal.

Oct/Nov 2020

At the start of year 1, two companies each bought a motor vehicle for $10000. Company G applied the straight-line method of depreciation at a rate of $15\%$ per annum, whereas Company H used the reducing balance method at a rate of $20\%$ per annum. What was the difference between the depreciation charges of the two companies in year 2?

Oct/Nov 2021

At the start of year 1, two companies each bought a motor vehicle for $10000. Company G applied the straight-line method of depreciation at 15% per annum, whereas Company H applied the reducing balance method at 20% per annum. What was the difference between the depreciation charge for year 2 for the two companies?

Oct/Nov 2021

At the start of year 1, each of two companies bought a motor vehicle for $10000. Company G applied the straight-line method of depreciation at a rate of $15\%$ per annum, whereas Company H applied the reducing balance method at a rate of $20\%$ per annum. What is the difference between the depreciation charges for year 2 for the two companies?

Oct/Nov 2021

Jas runs a printing business and has recently made several expenditures connected with her premises.

Oct/Nov 2021

Simon runs a business that sells office stationery. On 1 January 2019, he owned two delivery vehicles that had been bought on 1 January 2018. Delivery vehicle A cost $30 000 and delivery vehicle B cost $25 000. Simon applies the straight-line method to depreciate the delivery vehicles. A rate of 20% per annum on cost is used, with the rate applied for every part of the year that the delivery vehicles are owned. Because business declined, delivery vehicle B was sold on 31 March 2020 and a cheque for $10 350 was received. Delivery vehicle A was still being used at the end of 2020.

Oct/Nov 2021

Manjit records depreciation of $1000 for her motor vehicles at the end of each financial year. Which journal entry would Manjit record at the end of each financial year?

Oct/Nov 2022

At the beginning of his financial year, Jason bought a new machine for $20\,000$. At that time, the book value of his old machine was $6000$. Jason received $4500$ for the old machine as part exchange. He settled the remaining amount by cheque. Machinery is depreciated by $20\%$ each year. What amount should be debited to Jason's income statement for the year?

Oct/Nov 2022

Wentile bought a motor vehicle for \$35000. He expected it to remain in use for five years before being sold for \$5000. Wentile calculated depreciation on the motor vehicle using the straight-line method at a rate of $20\%$ per annum. What was the accumulated depreciation on this motor vehicle at the end of year 2?

Oct/Nov 2022

At the start of his financial year, Jason bought a new machine for $20000. On that date, the book value of his old machine was $6000. Jason received $4500 in part exchange for the old machine. He settled the remaining amount by cheque. Machinery is depreciated at 20% per annum. How much should be charged to Jason's income statement for the year?

Oct/Nov 2022

Manjit charges depreciation on her motor vehicles by $1000 at the end of every financial year. Which journal entry should Manjit record at the end of each financial year?

Oct/Nov 2022

At the beginning of his financial year, Jason bought a new machine costing $20000. On that date, the book value of his old machine was $6000. Jason received an allowance of $4500 for the old machine as part exchange. He settled the remaining amount by cheque. Machinery is depreciated at $20\%$ per annum. What amount should be charged to Jason's income statement for the year?

Oct/Nov 2022

Give one reason why depreciation is charged on a non-current asset?

Oct/Nov 2023

Under the revaluation method, which non-current asset ought to be depreciated?

Oct/Nov 2023

The original cost of a motor van was $11500, and it had accumulated depreciation of $9000. The van was then sold for $2750. How ought the profit or loss on disposal of the van to be recorded in the disposal account?

Oct/Nov 2023

Why is depreciation applied to non-current assets?

Oct/Nov 2023

On 1 January, Raheem bought equipment for $850. It was expected to last for $5$ years and to have a scrap value of $50$. The asset was depreciated by the straight-line method. After $3$ years, the machine was sold for $100. What was the profit or loss on disposal?

Oct/Nov 2023

What is one reason for charging depreciation on a non-current asset?

Oct/Nov 2023

Which non-current asset is to be depreciated by means of the revaluation method?

Oct/Nov 2023

A motor van first cost $11500 and had been depreciated by $9000. The van was then sold for $2750. How should the profit or loss arising from the sale of the van be shown in the disposal account?

Oct/Nov 2023

For what reason ought a business to depreciate its non-current assets?

Oct/Nov 2024

Which of the following statements about depreciation are correct?

Oct/Nov 2024

A machine that originally cost $10000$ was depreciated over two years at $10\%$ per annum by the straight-line method. It was later sold for cash, and the loss on disposal was $700$. On the same day, a replacement machine was purchased for $12400$ cash. What was the net decrease in the cash balance?

Oct/Nov 2024

Why does a business need to depreciate its non-current assets?

Oct/Nov 2024

A business operates a fleet of delivery vehicles. The statement of financial position at 31 December 2022 shows that the vehicles had an original cost of $440000, and accumulated depreciation was $270000. On 1 April 2023, the business bought two more vehicles for a combined $70000 on credit from L Autos. One of the vehicles was sold on 30 November 2023. Its original cost was $28000 and accumulated depreciation stood at $16800. The vehicle was disposed of for $10500 to a local garage, and payment was received by bank transfer. Depreciation is charged on the straight-line method at 20% per annum. Depreciation for a full year is taken in the year of purchase. No depreciation is charged in the year of disposal.

Oct/Nov 2024

A firm operates a fleet of delivery vehicles. Figures taken from the statement of financial position at 31 December 2022 show that the vehicles had an original cost of $440000 and accumulated depreciation of $270000. On 1 April 2023, the business acquired two extra vehicles on credit from L Autos for a combined cost of $70000. The business sold one vehicle on 30 November 2023. This vehicle had originally cost $28000 and had accumulated depreciation of $16800. It was sold to a local garage for $10500, paid by bank transfer. Depreciation is provided for using the straight-line method at 20% per annum. A full year’s depreciation is charged in the year of purchase. No depreciation is charged in the year of disposal.

Oct/Nov 2024

At the start of the year, on 1 January, Zac spent $420 on repairing equipment. He recorded this figure in the equipment account. By the close of the year, on 31 December, depreciation at 20% per annum was applied to the balance in the equipment account, using the straight-line method. What was the total impact on the carrying value of the equipment on 31 December?

Oct/Nov 2025

Why must a business account for depreciation in its accounting records?

Oct/Nov 2025

An asset that had an original cost of $20000 had accumulated depreciation of $15000 when it was sold for $3000. Which entry would appear in the disposal account to show the amount transferred to the income statement?

Oct/Nov 2025

On 1 January 2022, T Limited purchased a motor vehicle for $30000. Depreciation was charged at 30% per annum by the reducing balance method. T Limited's financial year ends on 31 December. What is the net book value of the motor vehicle at 31 December 2024?

Oct/Nov 2025

Susan operates as a trader. Her financial year ends on 5 April. On 6 April 2023, she purchased a motor vehicle for $10000. Depreciation was provided at 25% using the straight-line basis, and it was sold on 15 May 2025 for $3000. No depreciation was charged during the year of disposal. What was the profit or loss on disposal?

Oct/Nov 2025

Ahmed runs a vehicle breakdown recovery business. He owns one recovery vehicle and has given the following details about it: Date of purchase: 1 October 2021 Purchase price: $80000 paid by bank transfer Estimated residual value: $30000 Estimated working life: 5 years Ahmed gives a full year’s depreciation in the year the vehicle is bought but records no depreciation in the year it is sold. His vehicles are depreciated by the reducing balance method at 20% per annum. The recovery vehicle is now 4 years old and is no longer dependable. Ahmed thought about replacing it on 31 August 2025. Ahmed’s financial year ends on 30 April.

Oct/Nov 2025