Accounting 0452 · IGCSE · Accounting for depreciation and disposal of non-current assets
Accounting for depreciation and disposal of non-current assets — practice question
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.
(a)[2]
Calculate the depreciation expense for the year ended 31 December 2023.
(b)[10]
Prepare the company’s ledger accounts for delivery vehicles, provision for depreciation and disposal of delivery vehicles for the year ended 31 December 2023. Balance the accounts and carry down the balances on 1 January 2024.
(c)[5]
Advise the owner of the company on whether he ought to take this action. Support your view with two advantages and two disadvantages of moving to the reducing balance method.
(d)[3]
Put a tick (✓) in the correct column to show the most appropriate depreciation method for each non-current asset in the table below.
Worked solution & mark scheme
This 20-mark question has a full step-by-step worked solution and mark scheme.