Open Book Test: IGCSE Accounting Ch. 11, 24, 25

Jane bought a non-current asset for $5,000 and depreciated it at 10% per annum on the straight line basis. At the end of year 2 he sold it for $4,100. What was the profit or loss on disposal?

• $50 loss

• $50 profit

• $100 loss

• $100 profit

Zen bought a machine for $10,000 and depreciated it at the rate of 30% per annum on the reducing (diminishing) balance basis. What was the net book value at the end of year 2?

• $4,000

• $6,000

• $4,900

• $5,100

Why does a business provide for depreciation of its non-current asset?

• To set aside a specific fund for the future repair of the non-current asset

• To charge the cost of the non-current asset against the profit in the year it is purchased

• To show the net book value of the non-current asset in the statement of financial position

• To spread the cost of the non-current asset over its useful life

Which of the following assets best be depreciated using the revaluation method?

• Building

• Machinery

• Loose tools

• Motor vehicle

Refer to Alex's Statement of Financial Position (extract) at 31 December 2014. Calculate the depreciation of the motor vehicle in the year ending 31 December 2015.

Pick the causes for the provision of depreciation of non-current asset

• Physical deterioration

• Economic reasons

• Matching and prudence

• Depletion of natural resources

• Social factors

Explain the straight line method of depreciation

• The depreciation is calculated on the net cost price and the same amount is written off each year

• The same percentage is written off each year but it is calculated on the net book value of the asset

Explain the reducing (diminishing) balance method of depreciation

• The depreciation is calculated on the net cost price and the same amount is written off each year

• The same percentage is written off each year but it is calculated on the net book value of the asset

A restaurant records its equipment at valuation. How does it calculate its depreciation?

• Value at start of year + equipment purchased + value at end of year

• Value at start of year + equipment purchased – value at end of year

• Value at start of year – equipment purchased – value at end of year

• Value at start of year – equipment purchased + value at end of year

What is the financial statement in which the accumulated provision for depreciation appears? State in which section it appears.

• Income statement; Cost of sales

• Statement of financial position; Current assets

• Income statement; Expenses

• Statement of financial position; Non-current assets