NCA and Depreciation

A car has a list price of £23,500 but the garage gives Ride plc a 10% trade discount. In settlement the garage accepts payment of £18,000, together with an old company car. The amount to be capitalised by Ride plc for the new car is:

• £16,200

• £18,000

• £21,150

• £23,500

Demolition plc purchases a machine for £15,000 on 1 January 20X1. After incurring transportation costs of £1,300 and spending £2,500 on installing the machine it breaks down and costs £600 to repair. Depreciation is charged at 10% per annum. At what carrying amount will the machine be shown in Demolition plc's statement of financial position at 31 December 20X1?

• £13,500

• £14,670

• £16,920

• £18,800

What is the reasoning behind charging depreciation in historical cost accounting?

• To ensure funds are available for the eventual replacement of the asset

• To comply with the consistency concept

• To ensure the asset is included in the statement of financial position at the lower of cost and net realisable value

• To match the cost of the non-current asset with the revenue that the asset generates

Beta plc purchased plant and equipment on 1 July 20X1 for £40,000. The scrap value of the plant at the end of its ten-year useful life is £4,000. Beta plc's policy is to charge depreciation monthly on the straight-line basis. The journal entry to record the depreciation charge on the plant in Beta's statement of profit or loss for the reporting period of 12 months ending 30 September 20X1 should be:

• Debit Depreciation expense £900; Credit Accumulated depreciation £900

• Debit Accumulated depreciation £900; Credit Depreciation expense £900

• Debit Depreciation expense £1,000; Credit Accumulated depreciation £1,000

• Debit Accumulated depreciation £1,000; Credit Depreciation expense £1,000

Cataract plc purchases a machine for which the supplier's list price is £28,000. Cataract plc pays £23,000 in cash and trades in an old machine, which has a carrying amount of £8,000. It is the company's policy to depreciate machines at the rate of 10% per annum on cost. What is the carrying amount of the machine after one year?

• £18,000

• £25,200

• £20,700

• £22,200

Derek plc purchased a van on 1 October 20X0 for a total cost of £22,000 by paying £17,500 cash and trading in an old van. The old van had cost £20,000 and the related accumulated depreciation was £14,200. The loss on disposal of the old van in Derek plc's statement of profit or loss for the year ended 31 December 20X0 is:

• £1,300

• £2,000

• £2,500

• £5,800

Your firm bought a machine for £5,000 on 1 January 20X1, when it had a useful life of four years and a residual value of £1,000. Straight-line depreciation is to be applied on a monthly basis. On 31 December 20X3, the machine was sold for £1,600. The amount to be entered in the 20X3 statement of profit or loss for profit or loss on disposal is:

• profit of £600

• loss of £600

• profit of £350

• loss of £400

Stripes plc purchased new machinery on 1 August 20X4 for £38,000. The scrap value of the machinery at the end of its six-year useful life has been assessed as £2,000. Stripes plc's policy is to calculate depreciation monthly on the straight-line basis. The depreciation charge in Stripes plc's statement of profit or loss for year ended 31 March 20X5 should be:

• £4,000

• £3,500

• £6,000

• £4,500

A company purchased a car for £18,000 on 1 January 20X0. The car was traded in on 1 January 20X2. The new car has a list price of £30,000 and the garage offered a part-exchange allowance of £5,000. The company provides depreciation on cars using the reducing balance method at a rate of 25% per annum. What loss on disposal will be recognised in the statement of profit or loss for the year ended 31 December 20X2?

• £5,125

• £8,500

• £10,125

• £11,175

On 1 January 20X4 Joffa plc purchased a new machine at a cost of £96,720. Delivery costs were £3,660 and internal administration costs of £9,450 were incurred. At that time Joffa plc planned to replace the machine in five years, when it would have no value, and to depreciate the machine on a straight-line basis. Joffa plc decides on 1 January 20X6 that the machine only has one remaining year of useful life. There is no change to the residual value at the end of its life.
How much depreciation will be charged in respect of this machine in Joffa plc's statement of profit or loss for the year ended 31 December 20X6?

• £58,032

• £60,228

• £65,898

• £33,460