IGCSE Depreciation Test

A trader provided the following information about a non-current asset.

A trader provided the following information about a non-current asset.

cost $12 000

accumulated depreciation at start of year $1800

method of depreciation reducing (diminishing) balance at

15% per annum

What was the accumulated depreciation at the end of the year?

• $1530

• $3330

• $3600

• $8670

The non-current assets of a sole trader increased.

What might have caused this to happen?

• a decrease in the bank overdraft

• an increase in trade receivables

• the charging of depreciation

• the introduction of capital by the owner

Why is depreciation provided?

• to estimate the cost to the business of wear and tear

• to set aside funds for future repairs to the asset

• to show market values in the statement of financial position

• to spread the cost of an asset over its useful life

Jamal treats purchases of loose tools as capital expenditure.

On 1 July 2014 his loose tools were valued at $7100.

On 1 September 2014 he bought new tools costing $1200.

On 30 June 2015 he valued loose tools at $6000.

Which amount for loose tools appeared in his income statement for the year ended 30 June 2015?

• $100

• $1100

• $1200

• $2300

A disposal account showed the following.

Which book of prime entry was used to transfer the $300 to the income statement and how was it treated there?

• book of prime entry - general journal

  treatment in income statement - as a loss

• book of prime entry - general journal

  treatment in income statement - as a profit

• book of prime entry - sales journal

  treatment in income statement - as a loss

• book of prime entry - sales journal

  treatment in income statement - as a profit

The depreciation of equipment for the year was $200.

Which journal entry records this?

• Depreciation of equipment - debit $200

  Income statement - credit $200

• Income statement - debit $200

  Provision for depreciation of equipment - credit $200

• Provision for depreciation of equipment - debit $200

  Depreciation of equipment - credit $200

• Provision for depreciation of equipment - debit $200

  Income statement - credit $200

A business provides for the depreciation of its non-current assets.

What is the effect of this?

• profit for the year decrease

  net book value of non-current assets decrease

• profit for the year decrease

  net book value of non-current assets increase

• profit for the year increase

  net book value of non-current assets decrease

• profit for the year increase

  net book value of non-current assets increase

What is the effect of providing for depreciation?

• It increases profit.

• It reduces profit.

• It extends the life of non-current assets.

• It increases the cash balance.

A business uses the straight line method of depreciation.

The following information is provided.

motor vehicles at cost $30 000

anticipated life 4 years

residual value $2000

What is the annual depreciation charge for motor vehicles?

• $2000

• $5000

• $7000

• $7500

A business purchased a motor vehicle on 1 January 2012 for $24 000.

The business depreciates motor vehicles at 25% per annum using the reducing balance method.

No depreciation is charged in the year of disposal.

The motor vehicle was sold on 31 July 2015 for $12 000.

What was the profit on the sale of the motor vehicle?

• $1875

• $4000

• $5250

• $8000