WorksheetsOpen Book Test: IGCSE Accounting Ch. 11, 24, 25
Total questions: 20
Worksheet time: 10mins
Jane bought a non-current asset for $5,000 and depreciated it at 10% per annum on the straight line basis. At the end of year 2 he sold it for $4,100. What was the profit or loss on disposal?
$50 loss
$50 profit
$100 loss
$100 profit
Zen bought a machine for $10,000 and depreciated it at the rate of 30% per annum on the reducing (diminishing) balance basis. What was the net book value at the end of year 2?
$4,000
$6,000
$4,900
$5,100
Why does a business provide for depreciation of its non-current asset?
To set aside a specific fund for the future repair of the non-current asset
To charge the cost of the non-current asset against the profit in the year it is purchased
To show the net book value of the non-current asset in the statement of financial position
To spread the cost of the non-current asset over its useful life
Which of the following assets best be depreciated using the revaluation method?
Building
Machinery
Loose tools
Motor vehicle
Refer to Alex's Statement of Financial Position (extract) at 31 December 2014. Calculate the depreciation of the motor vehicle in the year ending 31 December 2015.
(a)
Pick the causes for the provision of depreciation of non-current asset
Physical deterioration
Economic reasons
Matching and prudence
Depletion of natural resources
Social factors
Explain the straight line method of depreciation
The depreciation is calculated on the net cost price and the same amount is written off each year
The same percentage is written off each year but it is calculated on the net book value of the asset
Explain the reducing (diminishing) balance method of depreciation
The depreciation is calculated on the net cost price and the same amount is written off each year
The same percentage is written off each year but it is calculated on the net book value of the asset
A restaurant records its equipment at valuation. How does it calculate its depreciation?
Value at start of year + equipment purchased + value at end of year
Value at start of year + equipment purchased – value at end of year
Value at start of year – equipment purchased – value at end of year
Value at start of year – equipment purchased + value at end of year
What is the financial statement in which the accumulated provision for depreciation appears? State in which section it appears.
Income statement; Cost of sales
Statement of financial position; Current assets
Income statement; Expenses
Statement of financial position; Non-current assets
A car was bought for $6,000 on 1 January 2018. It was sold on 6 October 2020 at a profit of $450. The car was depreciated at 10% using the reducing balance method on assets in use at the end of the year. Calculate the price at which the car was sold.
(a)
Choose which statements represent the fact that providing depreciation is an application of the accounting principle of accruals (matching)
The cost of a non-current asset and the revenues arising from its use are matched in an accounting period
Depreciation is one of the expenses of running a business
The cost of a non-current asset is spread over its useful life
Whichever method of calculation is used the result is shown in a provision for depreciation account
With the _____ method of calculating depreciation, the asset is reassessed for value at the end of the financial year.
Straight line
Reducing (diminishing) balance
Revaluation
Choose the accounting principles used in the provision for depreciation
Matching: Depreciation is charged as an expense in the income statement based on an estimate of how much of the overall economic usefulness of the noncurrent asset has been used up in that year
Realisation: Revenues can only be recognised when it is earned
Prudence: To record non-current assets at a more realistic value than the historic cost
Business entity: The affairs of a business are treated as being separate from the non-business activities of its owner
The purchase of a non-current asset is (a) expenditure because it is one-off item and the asset will last for more than one year.
Depreciation is treated as (a) expenditure because it is recurring and not one-off. It is an expense incurred as part of the core operating activities of the business.
What are assets?
Items that are bought for long-term use by a business
Items that are expected to be turned into cash in the near future
Items that are owned by or owed by a business
Items that are owned by or owed to a business
Amit depreciates his buildings at the rate of 2% per annum using the straight line method. He bought land for $200,000. It cost $120,000 to build a warehouse on it. After five years he sold the warehouse for $299,000. What was the profit or loss on disposal?
$9,000 loss
$9,000 profit
$11,000 loss
$11,000 profit
Which group contains only trading businesses?
Driving school, motor insurance agency, vehicle repair business
Driving school, motor insurance agency, petrol station
Motor parts shop, vehicle repair business, car dealership
Motor parts shop, petrol station, car dealership
Which accounting objective is being applied when financial information affects business decisions?
Comparability
Relevance
Reliability
Understandability
