Sales of Non Current Assets Quiz

Depreciation of non current assets: What is the purpose of depreciation in accounting?

• To allocate the cost of non current assets over their useful life.

• To calculate the profit from non current assets

• To increase the value of non current assets

• To reduce the cost of non current assets

Depreciation of non current assets: Explain the straight-line method of depreciation.

• The straight-line method allocates less depreciation in the early years of an asset's life.

• The straight-line method does not allocate any depreciation for non current assets.

• The straight-line method evenly allocates the cost of a non current asset over its useful life.

• The straight-line method allocates more depreciation in the early years of an asset's life.

Which is not a reason for sales of non current asset?

• Excess assets

• Upgrading the assets

• Raise funds for the business

• Increase gross profits

A motor vehicle costing $50 000 with an accumulated depreciation of $31 900 was sold for $19 000. Calculate the gain or loss on the sales of the non current asset.

• Gain of $17 100

• Loss of $31 000

• Loss of $900

• Loss of $12 900

To calculate the gain or loss on sales of non-current assets

• Selling price - Cost of non current assets

• Selling price - Net book value of non current assets

• Selling price - Net realisable value of non current assets

• Cost - Net book value of non current assets

What journal entry is made to record the proceeds from the sale of non current assets?

• Debit non current asset account, credit sales revenue account

• Debit cash or bank account, credit sales of non current asset account

• Debit trade payable, credit non current asset account

• Debit non current asset account, credit cash or bank account

Explain how the sale of non current assets affects the statement of financial performance.

• Increase the Sales revenue

• Increase other expenses or other incomes

• Does not affect the profits of the business

• Increase the other income of the business

What is the effects of the sale of non current assets on the statement of financial position.

• Increase in other receivable

  Increase in cost of NCA

  Decrease in accumulated depreciation

• Increase in Cash in hand

  Decrease in cost of NCA

  Decrease in accumulated depreciation

• Increase in Cash at bank

  Decrease in Net book value of NCA

• Increase in Cash at bank

  Decrease in Depreciation

  Decrease in cost of NCA

Business bought an office equipment costing $10 000 on 1 January 2022. The accounting year end of the business is on 31 December. The depreciation of the office equipment is charged at 10% on book value every year. The motor vehicle was sold off on 1 January 2024 for $8 500 by cash. Calculate the gain or loss on sales of non current asset.

• Gain of $400

• Loss of $500

• Loss of $1 500

• Gain of $1 210