Double-Entry Records for Depreciation

Any balance brought down on a provision for depreciation account . . .

• should be included in the trial balance as a debit balance.

• should be included in the trial balance as a credit balance.

• should sometimes be included in the trial balance as a debit balance and sometimes as a credit balance.

• should not be included in the trial balance at all.

If the depreciation charge on vehicles for the current year is accounted for by debiting the profit and loss account and crediting the provision for depreciation of vehicles account, then, after the above entries have been made, the balance on the provision for depreciation of vehicles account is . . .

• transferred to the vehicles account.

• listed in the trial balance.

• deducted from the cost/valuation of vehicles in the balance sheet.

• transferred to the profit and loss account.

Upon the disposal of a vehicle, the double-entry which a furniture retailer should make to record the receipt of the sale proceeds is:

• Account to Debit - Bank

  Account to Credit - Sales

• Account to Debit - Vehicle disposals

  Account to Credit - Vehicle

• Account to Debit - Bank

  Account to Credit - Vehicle disposals

• Account to Debit - Vehicle

  Account to Credit - Provision for depreciation

If there is a separate provision for depreciation account in the nominal (general) ledger for each category of fixed asset, the double-entry to record the depreciation charge on machinery for the current year is:

• Account to Debit - Profit and loss

  Account to Credit - Provision for depreciation of machinery

• Account to Debit - Machinery

  Account to Credit - Profit and loss

• Account to Debit - Profit and loss

  Account to Credit - Machinery

• Account to Debit Account to Credit

  None of the above.

When a machine is disposed of, the correct way to record the total depreciation charged on it up to the date of disposal is:

• Debit the Provision for depreciation of machinery account and Credit the Machinery account.

• Debit the Provision for depreciation of machinery account and Credit the Machinery disposal account.

• Debit the Machinery account and Credit the Provision for depreciation of machinery account.

• Debit the Machinery disposal account and Credit the Provision for depreciation of machinery account.

A loss incurred upon the disposal of plant and equipment should be . . .

• credited to the plant and equipment account.

• debited to the profit and loss account.

• debited to the provision for depreciation account.

• credited to the provision for depreciation account.

The balance on a finn's plant and machinery account on I January 2000 was £5,000. During that year the following transactions took place on the dates shown:

1 May Plant, which had originally cost £750, was sold.

1 September New machinery costing £3,000 was purchased.

If depreciation is calculated at the rate of I 0% per annum, on a strict time basis, using the straight line method, the depreciation charge on plant and machinery for 2000, to the nearest pound, is:

• £525

• £550

• £600

• £625

On 1 January 1997, a finn bought a second-hand van for £6,000 and paid £260 to have the firm's name and logo painted on it.

The firm depreciates vehicles over a five year period using the straight-line method, assuming a nil residual value. A full year's depreciation is charged in the year of acquisition and none in the year of disposal. The firm's accounting year-end is 3 I December.

What was the profit on the sale of the van, if it was sold for £5,000 on 31 March 2000 ?

• £1,000

• £1,244

• £2,496

• £2,600

On 31 August 20X0 a firm bought a machine for £44,000. At that date, the estimated useful economic life of the machine was seven years and its estimated residual value was £2,000. On 30 June 20X4 the firm sold the machine for £18,000. The firm's accounting period-end is 31 December and its policy is to calculate depreciation using the straight line method, charging a full year's depreciation in the year of acquisition and no depreciation in the year of disposal.

The profit earned, or the loss incurred, on the disposal of the machine was:

• Loss of £2,000

• Loss of £3,000

• Loss of £3,500

• Profit of £4,000

On 1 January 20X0, a firm, whose financial year-end is 31 December, bought an item of plant for £10,000. Initially, it was decided to depreciate the plant over ten years, using the straight line method, assuming no residual value. On I January 20X2, it became apparent that the plant would last only another five years, over which period it would be used equally.

The depreciation charge for 20X2 in respect of the above item was:

• £1,000

• £1,429

• £1,600

• £2,000