FAPS Lesson 3 - Starter

From the images below, select those that are generally considered to be an asset to a business

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What are the two main depreciation methods:

• Curved-line method

• Straight-line method

• Cost-saving method

• Diminishing (reducing) balance method

• Asset allowance (underline) method

A machine which was purchased for £8,000 is sold for £2,500 (both net of VAT). The machinery accumulated depreciation in relation to this machine shows a balance of £6,000. This means that?

• Loss on disposal of £500

• Gain on disposal of £500

• Loss on disposal of £2000

• Neither a loss or gain has been made

The bookkeeping entry to record a loss on disposal of non-current assets is?

• DR Non-current asset account, CR Disposals account

• DR Statement of profit or loss, CR Non current asset account

• CR Statement of profit or loss, DR Disposals account

• DR Statement of profit or loss, CR Disposals

• DR Bank account, CR Statement of profit or loss

A business has recently sold an old machine. The machine was originally purchased for £10,000 plus VAT (the VAT was reclaimed)

Two years depreciation has been accumulated. The method used was 10% diminishing balance. The machine was sold for £8000 plus VAT.

As a result, this means that there has been a​ ​ (a)   (b)   on disposal ​

• £100
• loss
• gain
• £200
• £120

A disposal (loss or gain) will be shown in the statement of profit or loss

• True

• False

An accumulated depreciation account (e.g. Office equipment: accumulated depreciation) muse be closed off and transferred to the profit and loss account at the end of a financial year?

• True

• False

A depreciation charge(s) account must be closed off and transferred to the profit and loss account at the end of a financial year?

• True

• False

Depreciation for the year needs to be included as an adjustment in the extended trial balance.

The charge for the year is £2000 relating to office equipment. The correct double entry to record this adjustment would be?

• DR depreciation charges £2000, CR office equipment: accumulated depreciation £2000

• DR office equipment: accumulated depreciation £2000, CR depreciation charges £2000

• DR office equipment at cost £2000, CR office equipment: accumulated depreciation £2000

• DR depreciation charges £2000, CR disposals account £2000

• DR depreciation charges £4000, CR office equipment: accumulated depreciation £2000

A company has used a trade-in allowance to part exchange a vehicle. The vehicle that was traded in originally cost £30,000 and the associated accumulated depreciation for this vehicle was £10,000.

The supplier of the new vehicle allowed a part-exchange allowance of £19,000 with the remaining £12,500 paid from the bank.

How much was the total cost of the newly acquired vehicle?

• £1,000

• £43,500

• £41,000

• £31,500

• £20,000