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Topical›Accounting 9706›Financial accounting (AS Level)›Accounting for non-current assets›Paper 1

Accounting for non-current assets — Paper 1 · A Level Accounting 9706

1.3· 300 questions · 300 marks · 360 min · 2006–2025· Multiple choice

Every Cambridge A Level Accounting Paper 1 question on accounting for non-current assets, laid out as 72 A4 pages with the mark scheme below. Nothing is left out. Free to read, no account.

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Questions72 pages

Question 1: Which item should be treated as capital expenditure? A the cost of a printer for an existing computer system B repair costs to a car which …Question 2: A business uses the straight line method to provide for depreciation of equipment. Why should it continue to use this method in subsequent …Question 3: Which accounting policies illustrate the matching principle? 1 charging depreciation on fixed assets 2 revaluing fixed assets on a regular …Question 4: What would be treated as part of the capital cost of the purchase of a building? 1 legal costs of the purchase 2 redecoration of the buildi…1 / 72
Question 5: The following information relates to a company’s fixed assets at 31 December: cost price disposal value $ $ motor vehicles 25 000 18 000 eq…Question 6: Which item is revenue expenditure? A cost of painting new office premises during construction B cost of repairs to factory plant and machin…Question 7: On 1 October 2004 a company purchased machinery for $26 000. It was decided to depreciate the asset using the reducing balance method at a …Question 8: When is it necessary to distinguish between revenue and capital expenditure? A when preparing cash budgets B when preparing investment appr…Question 9: The table gives information relating to the fixed assets of a business. $ net book value at the end of the year 25 000 net book value at th…2 / 72
Question 10: A company has two fixed assets. Details are given in the table. cost residual asset date bought depreciation method $ value X 1 Jan, Year 1…Question 11: Which transaction applies the matching concept? A a machine acquired on long-term rental is included in fixed assets B computer equipment i…Question 12: Which item should be treated as capital expenditure? A cost of carriage on the purchase of a fixed asset B cost of replacement of part of a…Question 13: An item of machinery cost $60 000. The machinery was later sold for $8000 and the loss on disposal was $3000. What was the accumulated depr…3 / 72
Question 14: The table shows how a property appears in the balance sheet. $ land and buildings 100 000 accumulated depreciation (40 000) net book value …Question 15: Why do businesses charge depreciation on their fixed assets? A to ensure that sufficient cash is available to replace the assets B to show …Question 16: A company’s capital expenditure of $200 000 has been debited in error to the purchases account. Depreciation is provided at the rate of 15 …Question 17: A vehicle cost $30 000. The vehicle was later sold for $9000 and the profit on disposal was $1500. What was the accumulated depreciation of…4 / 72
Question 18: A transport business owned by a sole proprietor purchases a motor vehicle. This is charged to the Motor expenses account. What are the effe…Question 19: A business buys a computer for $2200 on 1 January 2007. The computer will be used for four years, after which time it will be sold for $280…Question 20: A company’s policy is to depreciate its equipment by 30 % annually using the reducing balance method. A piece of equipment which was two ye…Question 21: A business purchases a vehicle for $10 000. The business depreciates its non current (fixed) assets at 20 % using the diminishing value me…Question 22: An item of capital expenditure has been incorrectly treated as revenue expenditure in the accounts of a business. What is the effect of thi…Question 23: A business purchases a vehicle for $10 000. The business depreciates its non current (fixed) assets at 20 % using the diminishing value me…5 / 72
Question 24: A business purchases a vehicle for $10 000. The business depreciates its non current (fixed) assets at 20 % using the diminishing value me…Question 25: An item of capital expenditure has been incorrectly treated as revenue expenditure in the accounts of a business. What is the effect of thi…Question 26: Non current (fixed) assets of a company were: start of year end of year $ $ at cost 460 000 505 000 cumulative depreciation 215 000 237 000…Question 27: Non current (fixed) assets of a company were: start of year end of year $ $ at cost 460 000 505 000 cumulative depreciation 215 000 237 000…6 / 72
Question 28: Non current (fixed) assets of a company were: start of year end of year $ $ at cost 460 000 505 000 cumulative depreciation 215 000 237 000…Question 29: The non-current assets of a business are shown. end of year start of year $ $ cost 360 000 300 000 accumulated depreciation 120 000 75 000 …Question 30: How should goodwill be treated by a limited company? A Goodwill should always be written off immediately. B Non-purchased goodwill is shown…Question 31: How should goodwill be treated by a limited company? A Goodwill should always be written off immediately. B Non-purchased goodwill is shown…7 / 72
Question 32: The non-current assets of a business are shown. end of year start of year $ $ cost 360 000 300 000 accumulated depreciation 120 000 75 000 …Question 33: The non-current assets of a business are shown. end of year start of year $ $ cost 360 000 300 000 accumulated depreciation 120 000 75 000 …Question 34: A business purchases a machine for $3200. It is estimated that it will have a useful life of 5 years and a residual value of $700. Straight…Question 35: The following information relates to the non-current assets of a business formed three years ago. $ cost at start of year 1 10 000 accumula…8 / 72
Question 36: Expenditure on a machine during a year has included the following. $ insurance costs 2 400 new engine – machine will now produce more produ…Question 37: What should companies not show as non-current assets in their balance sheets? A plant bought on hire purchase B plant fully depreciated C p…Question 38: Which accounting policies illustrate the matching principle? 1 charging depreciation on non-current assets 2 revaluing non-current assets o…Question 39: Why is a provision for depreciation made in the financial statements? A to charge the cost of non-current assets against profits B to make …Question 40: A company has been depreciating its IT equipment over 5 years, but now finds that it is becoming obsolete in 3 years. What does the consist…9 / 72
Question 41: The following information relates to the non-current assets of a business formed three years ago. $ cost at start of year 1 10 000 accumula…Question 42: A business purchases a machine for $3200. It is estimated that it will have a useful life of 5 years and a residual value of $700. Straight…Question 43: Which asset is often revalued in a business’s accounts? A buildings B inventory C IT equipment D trade receivablesQuestion 44: A non-current asset costing $206 000, with a net book value of $131 000, is revalued to $275 000. How should the revaluation be recorded? A…Question 45: Which asset is often revalued in a business’s accounts? A buildings B inventory C IT equipment D trade receivables10 / 72
Question 46: A business sells a non-current asset for cash. The disposal account includes entries for the cost of the asset and the sales proceeds. Whic…Question 47: A business buys a vehicle for $10 000 on 1 January Year 1 and sells it for $6500 on 1 January Year 3, having depreciated it at 10 % a year …Question 48: Which item is revenue expenditure? A cost of painting new office premises during construction B cost of repairs to factory plant and machin…Question 49: A company uses the straight-line method of depreciation for all its non-current assets. On 1 January the company bought machinery on hire p…Question 50: A. Spender owns a road haulage business. What would be classified as capital expenditure? A number plates for new lorries B replacement fue…11 / 72
Question 51: Which statement is correct? A Assets cannot be revalued by companies at all. B Companies have to disclose their policy on revaluation in th…Question 52: A business purchased a machine for $10 000 at the beginning of year 1. The machine was depreciated using the reducing balance method at 30 …Question 53: The table below shows how a non-current asset appears in the statement of financial position. $ non-current asset at cost 120 000 accumulat…Question 54: A vehicle was part exchanged for a new vehicle. Which entries record the part exchange? account debited account credited A cash motor vehic…12 / 72
Question 55: A vehicle cost $12 000 and its estimated residual value was $2000. The vehicle was depreciated at 25% per annum using the straight line met…Question 56: A vehicle is sold for $1000. It had cost $6000 and $2800 depreciation had been provided on it. What is the profit or loss on disposal? A lo…Question 57: The table shows information relating to the non-current assets of a business. $ net book value at the beginning of year 28 000 net book val…Question 58: ABC Ltd purchased a non-current asset for $35 000 on 1 April 2009 and sold it on 1 October 2012 for $14 500. The company’s year end is 31 D…Question 59: A non-current asset costs $250 000 and has a useful economic life of 25 years. The estimated residual value is $10 000. Depreciation is pro…13 / 72
Question 60: Anna owns a plumbing business. Costs for the year were $49 500 for wages and $95 000 for materials. These included $2200 labour and $540 ma…Question 61: A building cost $340 000. The accumulated depreciation on the building was $47 600. It was decided to revalue the building to its market va…Question 62: The table shows extracts from the statements of financial position of a business. 2011 2012 $ $ non-current assets (at cost) 190 000 245 00…Question 63: A vehicle is sold for $1500. It cost $5000 and $3000 depreciation had been provided on it. Which entry is needed to close the disposal acco…Question 64: What would be treated as part of the capital cost of the purchase of a building? 1 legal costs of the purchase 2 redecoration of the buildi…14 / 72
Question 65: Ryan purchased a van for $16 000 on 31 December 2010. It is his policy to apply 25% per annum reducing balance depreciation for each part o…Question 66: Which statement about goodwill is correct? A Internally generated goodwill should be omitted from the statement of financial position. B Pu…Question 67: A trader uses the revaluation method of depreciation for loose tools. On 1 January loose tools were valued at $4620 and on 31 December at $…Question 68: What is the reason for providing depreciation on non-current assets? A to provide sufficient funds to replace the non-current assets B to s…Question 69: A business has a non-current asset turnover of two times, based on non-current assets valued at $250 000 at the end of 2011. The company us…Question 70: A new machine is purchased at a price of $75 000. In addition, delivery and installation cost is $2500. The business depreciates all non-cu…15 / 72
Question 71: Which costs may be capitalised as land and buildings? 1 construction cost of an extension 2 insurance premium 3 legal fees on purchase 4 re…Question 72: June purchased a new machine. She depreciated it at a rate of 40% a year on the reducing balance basis. After two years its net book value …Question 73: The following information relates to the motor vehicles of a business. 1 January 2013 31 December 2013 $ $ net book value 398 000 480 000 D…Question 74: A non-current asset is depreciated due to passage of time. Which type of non-current asset is it? A a computer which has become out of date…Question 75: On 1 June 2011, a company purchases machinery for $18 000. The company depreciates machinery at 20% per annum using the reducing balance me…16 / 72
Question 76: A company’s non-current asset turnover figure rises from 3.4 times in Year 1 to 4 times in Year 2. Sales revenue has been constant. What ex…Question 77: Sybil owns a vehicle which on 1 August 2014 will be shown at a cost of $10 000 with accumulated depreciation of $6000. On that date she exp…Question 78: An item of machinery cost $60 000. The machinery was later sold for $8000 and the loss on disposal was $3000. What was the accumulated depr…Question 79: A motor vehicle costing $8000 is depreciated by 25% per annum using the reducing balance method. After depreciating for two years it was so…Question 80: Daphne buys a non-current asset for $10 000. It has an estimated life of two years and a scrap value of $2000. She is considering whether t…17 / 72
Question 81: A business purchases a new van. The table shows the purchase invoice details. $ purchase price 13 000 delivery charge 500 sign writing 200 …Question 82: The following information relates to non-current assets. $ net book value at 1 January 2013 20 000 net book value at 31 December 2013 18 00…Question 83: The following is an extract from the statement of financial position for a company at 31 December 2012. cost depreciation net book value $ …18 / 72
Question 84: The non-current assets of a business are shown in the table. end of year start of year $ $ cost 360 000 300 000 accumulated depreciation 12…Question 85: What is the purpose of providing for depreciation? A to apply the matching principle B to calculate the true value of non-current assets C …Question 86: On 1 October 2011 a company purchased machinery for $26 000. It was depreciated at a rate of 20% per annum using the reducing balance metho…Question 87: A business provides the following information. $ cheque paid in 2013 for equipment bought in 2012 15 000 equipment purchased on credit in 2…19 / 72
Question 88: A business depreciates its non-current assets at 20% using the straight-line method. Depreciation is calculated on a time basis in the year…Question 89: Which item should be treated as capital expenditure? A the cost of a printer for an existing computer system B repair costs to a car which …Question 90: A trader depreciates fixtures and fittings at the rate of 10% a year on cost. On 1 January 2014 a purchase of new fixtures and fittings, $5…Question 91: Non-current assets of a company were as follows. start of year end of year $ $ at cost 460 000 505 000 accumulated depreciation 215 000 237…20 / 72
Question 92: A business buys a non-current asset and decides to apply the straight-line method of depreciation. The accountant forgets to include an est…Question 93: A manufacturing company uses the reducing balance method to calculate depreciation. What describes the depreciation expense? A fixed cost B…Question 94: Motor vehicles purchased for $530 000 at the start of the year have been incorrectly depreciated for the whole year at 10% instead of 25%. …Question 95: An asset with accumulated depreciation of $72 400 is sold for $46 500. There is a loss on disposal of $23 000. What was the cost of the ass…21 / 72
Question 96: An item of revenue expenditure is wrongly treated as capital expenditure. What is the effect of this error? non-current profit for the asse…Question 97: A trader prepares a disposal account. On which sides do the cost of the asset and sale proceeds appear? cost of the asset sale proceeds A c…Question 98: Land and buildings are shown in the books of account at a cost price of $200 000 with accumulated depreciation of $40 000. The property is …Question 99: Which cost should be treated as revenue expenditure? A installing a new sound system in a car B purchase of a trailer for a car C replacing…22 / 72
Question 100: A business depreciates its motor vehicles over four years using the straight-line method. A full year’s depreciation is charged in the year…Question 101: A depreciated non-current asset is revalued upwards. What is the effect of this on the statement of financial position? A Non-current asset…Question 102: The following information is available in respect of a non-current asset. $ purchase price 160 000 accumulated depreciation at the date of …Question 103: What is depreciation? A a means of allocating the cost of a non-current asset over its useful life B a measure of the decrease in market va…23 / 72
Question 104: Why is depreciation provided on non-current assets? A so that the cost is allocated to periods that benefit from them B so that the entity …Question 105: The following information relates to the disposal of a non-current asset. $ profit on disposal 5 200 cost of non-current asset sold 14 400 …Question 106: The table shows extracts from the statements of financial position of a business. 2014 2015 $ $ non-current assets (at cost) 190 000 245 00…Question 107: What would be treated as part of the capital cost of the purchase of a building? 1 cost of purchase 2 insurance of the building 3 installat…24 / 72
Question 108: A company’s financial year ends on 31 December. On 1 April 2015, the following payments relating to a new machine were made. $ purchase cos…Question 109: A business purchased a motor vehicle on 1 January 2012 for $24 000. The estimated useful life of the motor vehicle was four years and the e…Question 110: A building was purchased for $500 000. The following costs were also incurred. $ adapting the new building 50 000 legal fees for the buildi…25 / 72
Question 111: The table shows extracts from the statements of financial position of a business. 2014 2015 $ $ non-current assets (at cost) 190 000 245 00…Question 112: What would be treated as part of the capital cost of the purchase of a building? 1 cost of purchase 2 insurance of the building 3 installat…Question 113: A company purchased a lorry for $50 000 on 1 January 2015. It has an estimated residual value of $10 000 and a four-year life. The company …Question 114: The opening net book value of motor vehicles was $150 000. During the year a motor vehicle was sold for $26 000. There was a profit on disp…Question 115: A disposal account is used to record the sale of a non-current asset. Which transactions are recorded on the credit side of the disposal ac…26 / 72
Question 116: The following information was available for the disposal of a machine. $ accumulated depreciation 45 000 profit on disposal 8 100 sale proc…Question 117: A printing company installed a large printing press. Which costs are capital expenditure in the first year of its operation? 1 installation…Question 118: A vehicle was part exchanged for a new vehicle. Which entries record the part exchange? account debited account credited A cash motor vehic…Question 119: Why are non-current assets depreciated? A to ensure that funds exist for asset replacement B to show a reduction in the market values of no…Question 120: Which item should be treated as capital expenditure? A cost of carriage on the purchase of a non-current asset B cost of replacement of par…27 / 72
Question 121: During the year ended 31 December 2012 a business purchased a vehicle for $23 500. On 30 September 2015 it was sold for $3500. Depreciation…Question 122: A partnership revalues its non-current assets upwards. What are the ledger entries to record this? account to debit account to credit A non…Question 123: Why does a business charge depreciation on its non-current assets? A to retain profits for the replacement of worn out assets B to show the…Question 124: How is depreciation calculated using the straight-line method? A as a fixed percentage of the asset’s net book value B as a fixed percentag…Question 125: A business depreciates its machinery at 10% per annum using the straight-line method on a month-by-month basis. The business’s financial ye…28 / 72
Question 126: The table shows information relating to the non-current assets of a business. $ net book value at beginning of year 28 000 net book value a…Question 127: Amitav purchased a van costing $20 000. He provided an old van with a net book value of $8000 in part exchange. There was a profit on dispo…Question 128: The net book value of a company’s non-current assets was as follows. $ at 1 January 2016 100 000 at 31 December 2016 80 000 During 2016 ass…Question 129: Which statement describes the treatment of purchased goodwill for a limited company? A a tangible non-current asset that can be amortised B…Question 130: Which statements explain why depreciation might be charged on a non-current asset? 1 An asset could be subject to obsolescence. 2 The actua…29 / 72
Question 131: A trader bought a machine on 1 January 2015. He depreciated it at the rate of 10% per annum using the straight-line method, and he sold it …Question 132: The following information relates to non-current assets. $ net book value at 1 January 2016 20 000 net book value at 31 December 2016 18 00…Question 133: A business purchased a shop and incurred the following costs. $ purchase price of the shop 680 000 legal fees incurred in the purchase of t…Question 134: Why is a non-current asset depreciated? A to allocate its cost over its useful life B to measure its decline in market value C to measure i…30 / 72
Question 135: The following information is available in respect of a trader’s non-current assets. $ accumulated depreciation at 31 May 2015 40 000 deprec…Question 136: The following information relating to motor vehicles for a business is available. All motor vehicles were purchased 10 years ago at a total…Question 137: Which item is classed as revenue expenditure? A installation costs of machinery B legal fees on the purchase of premises C number plates on…Question 138: What is the purpose of depreciation? A to allocate the cost of the assets over their lives B to improve liquidity ratios of the business C …Question 139: A company’s year end is 30 April. It purchases a factory in May 2014 at a cost of $200 000. The factory will be depreciated over 20 years. …31 / 72
Question 140: A business has a year end of 31 December. It purchased a non-current asset on 1 January 2014 for $100 000. It was depreciated using the red…Question 141: The accounting year for a business ends on 31 December. On September 2013 it had purchased a machine for $20 000. The machine was sold on 3…Question 142: The table shows how a property was recorded in the statement of financial position. $ land and buildings 100 000 accumulated depreciation (…32 / 72
Question 143: A company purchased a machine for $50 000. It had an estimated resale value of $5000 at the end of five years. The machine was sold for $60…Question 144: Which accounting concepts apply to depreciation? 1 consistency 2 matching 3 money measurement 4 prudence A 1, 2 and 4 B 1 and 2 only C 2 an…Question 145: A motor vehicle was purchased for $12 000 on 1 January 2015. Its estimated residual value was $7000 and expected life 5 years. Depreciation…Question 146: The following information relates to a motor vehicle part-exchanged for a new vehicle in the year. $ cost of old vehicle 20 000 accumulated…33 / 72
Question 147: A company purchased a new machine costing $110 000 with an estimated life of 10 years. The machine was considered to have a residual value …Question 148: Adam’s financial year ends on 31 December 2017. On 1 January 2017 the net book value of machinery was $20 000. On 30 June 2017 he purchased…Question 149: A business has an accounting year-end of 31 March. It purchased a car on 1 April 2014 for $15 000. The car was sold on 30 September 2017 fo…Question 150: Why is depreciation charged on non-current assets? A to be able to calculate a profit or loss on disposal B to calculate a residual scrap v…34 / 72
Question 151: The net book values of a company’s non-current assets are as follows. $ at 1 January 2017 20 000 at 31 December 2017 15 000 During 2017 non…Question 152: Which costs may be capitalised as land and buildings? 1 construction cost of an extension 2 insurance premium 3 legal fees on purchase 4 re…Question 153: Why is an expense for depreciation included in the financial statements? A to charge the wear and tear on non-current assets against profit…Question 154: A company incurred the following expenditures on a motor van. $ year 1 purchase of motor van 80 000 year 2 purchase of new tyres 2 000 year…Question 155: Which non-current asset is most likely to be depreciated using the revaluation method? A loose tools B motor vehicles C office equipment D …35 / 72
Question 156: A trader purchased a motor vehicle costing $36 000 on 1 July 2016. The estimated useful life of the motor vehicle was five years and the es…Question 157: The following is an extract from the statement of financial position for a company at 31 December 2016. accumulated cost net book value dep…Question 158: Why does a business charge depreciation? 1 to be able to replace an asset at the end of its useful life 2 to charge the cost of an asset to…Question 159: The following information relates to non-current assets. $ net book value at 31 December 2016 42 000 net book value at 31 December 2017 34 …36 / 72
Question 160: During the year a business sells a non-current asset. The following information is available. $ original cost 500 accumulated depreciation …Question 161: Why is depreciation provided on non-current assets? A so that the cost is allocated to periods that benefit from them B so that the busines…Question 162: A company purchased an asset costing $100 000. It had a life of five years and an estimated residual value of $20 000. The company uses str…Question 163: A business provides the following information. $ cheque paid in 2018 for equipment bought in 2017 15 000 equipment purchased on credit in 2…37 / 72
Question 164: Daphne buys a non-current asset for $10 000. It has an estimated life of two years and a scrap value of $2000. She is considering whether t…Question 165: Why is depreciation provided on non-current assets? 1 to ensure funds are available to replace the item 2 to ensure the profits of the busi…Question 166: The net book value of motor vehicles of a business was as follows: 31 December 31 December 2017 2018 motor vehicles $238 000 $243 000 Durin…Question 167: A business with a year-end of 31 December purchased a motor vehicle on 1 January 2015 for $24 000. The estimated useful life of the motor v…38 / 72
Question 168: What are causes of depreciation on non-current assets? 1 change in its cost of repair 2 change in its market value 3 changes in technology …Question 169: June purchased a new machine. She depreciated it at a rate of 40% per annum using the reducing balance method. After two years its net book…Question 170: The following information relates to the motor vehicles of a business. 1 January 2018 31 December 2018 $ $ net book value 398 000 480 000 D…Question 171: Why is depreciation provided on a non-current asset? 1 to apply the matching concept 2 to ensure the asset is shown at its market value 3 t…Question 172: The accounting year of a business ends on 31 December. An office building with a useful life of 40 years was purchased on 1 January 2010 fo…39 / 72
Question 173: A new machine is purchased at a price of $75 000. In addition, delivery and installation cost is $2500. The business depreciates all non-cu…Question 174: The net book value of motor vehicles at the start of the year was $150 000. During the year a motor vehicle was sold for $26 000. There was…Question 175: A company’s accounting year end is 30 June. On 1 October 2016 it purchased a machine for $16 000. This was sold for $7000 on 31 March 2019.…Question 176: A business buys a non-current asset and decides to apply the straight-line method of depreciation. The accountant forgets to include an est…40 / 72
Question 177: The table gives information relating to the non-current assets of a business. $ net book value at the end of the year 25 000 net book value…Question 178: The accounting year of a company ends on 31 December. It purchased a warehouse for $100 000 on 1 January 2013. The warehouse had an estimat…Question 179: Which costs are not a part of capital expenditure when purchasing a new machine? 1 delivery costs 2 installation costs 3 machine operator t…Question 180: A business had a non-current asset with a net book value of $18 000 at 31 December 2018. It had been purchased during the year ended 31 Dec…Question 181: The following information relates to the disposal of a non-current asset. $ profit on disposal 5 200 cost of non-current asset sold 14 400 …41 / 72
Question 182: The following costs for a business relate to a newly purchased machine. 1 alterations to the factory building to install the machine 2 paym…Question 183: The following information is available. $ freehold premises at cost 125 000 provision for depreciation of freehold premises 50 000 The prem…Question 184: A business has a year end of 31 December. It purchased a motor vehicle on 1 January 2017 for $15 000. The motor vehicle was sold on 31 Marc…42 / 72
Question 185: What are the characteristics of non-current assets? 1 They are not intended for resale. 2 They provide future economic benefits. 3 They pre…Question 186: A business has a year end of 31 December. It depreciates its motor vehicles over four years using the straight-line method. A full year’s d…Question 187: The following information is available in respect of the purchase of a new machine. $ machine cost 80 000 less 10% trade discount 8 000 72 …Question 188: A company purchased a machine on 1 April 2017 for $25 000. It was depreciated at 20% per annum using the straight-line method. A full year’…43 / 72
Question 189: Why do businesses charge depreciation on their non-current assets? A to ensure that sufficient cash is available to replace the assets B to…Question 190: What are the characteristics of non-current assets? 1 They are not intended for resale. 2 They provide future economic benefits. 3 They pre…Question 191: A business has a year end of 31 December. It depreciates its motor vehicles over four years using the straight-line method. A full year’s d…Question 192: The following information is available in respect of the purchase of a new machine. $ machine cost 80 000 less 10% trade discount 8 000 72 …44 / 72
Question 193: A company has two non-current assets. Details are as follows: cost residual asset date bought depreciation method $ value X 1 Jan 2018 10 0…Question 194: A business purchased a new machine on 1 January 2020 for $15 000 paying $10 000 by cheque. The balance was settled by part exchange of an o…Question 195: What is depreciation? A a means of allocating the cost of a non-current asset over its useful life B a measure of the decrease in market va…Question 196: A trader depreciates fixtures and fittings at the rate of 10% per annum on cost. On 1 January 2019 a purchase of new fixtures and fittings,…Question 197: A company had a non-current asset which cost $370 000. The asset had a 10-year useful life and an estimated residual value of $20 000. A fu…45 / 72
Question 198: A motor vehicle costing $8000 is depreciated by 25% per annum using the reducing balance method. After depreciating it for two years it was…Question 199: A business purchased a new delivery van. The total amount paid is made up of the basic cost of the delivery and the following: 1 changing t…Question 200: Which item is not included as part of the capital cost of a new machine? A cost of delivering the machine to the factory B cost of installi…Question 201: Why does a business charge depreciation on its non-current assets? A to retain profits for the replacement of worn out assets B to show the…Question 202: The net book value of motor vehicles of a company is shown. beginning of end of the year the year $312 000 $305 000 During the year, an old…46 / 72
Question 203: On 1 January 2020, Marek bought some machinery. He paid a total of $50 000. Of this, $6000 was for maintenance of the machinery until 31 De…Question 204: Which statements about depreciation are correct? 1 It is an application of the matching concept. 2 It provides funds for the replacement of…Question 205: Which statement relating to depreciation is not correct? A A business can never change its accounting policy on depreciation. B Depreciatio…Question 206: Arnaud owned a vehicle which originally cost $20 000. During the year ended 31 May 2021, he paid for repairs of $3700 and provided deprecia…47 / 72
Question 207: Two years ago a business purchased two machines costing $25 000 each. During the third year one of them with a net book value of $16 000 wa…Question 208: A business purchased a machine, making the following payments. $ machine cost 7500 alterations to improve efficiency 1200 insurance for 12 …Question 209: A business had a financial year end of 31 December 2020. On 1 September 2020 it had sold an old motor vehicle and purchased a replacement. …Question 210: During the year ended 31 December 2017 a business purchased a vehicle for $23 500. On 30 September 2020 it was sold for $3500. Depreciation…48 / 72
Question 211: A company sold one of its delivery vehicles for $2800 after two years of use. The original cost of the vehicle was $6500. The company depre…Question 212: A trader depreciates loose tools using the revaluation method. Which account is credited at the end of the year to record depreciation on l…Question 213: A business sold one of its non-current assets. The following information relates to this asset. $ purchase price 50 000 depreciation to dat…49 / 72
Question 214: A business has a financial year end of 31 December. It depreciates its machinery on a month-by-month basis. It uses the straight-line metho…Question 215: A business purchased a non-current asset for $500 000 with an expected life of 20 years. After that time it was expected to be sold for $10…Question 216: Which items are capital expenditure? 1 payment of wages to staff to install new equipment 2 purchase of a new computer for office 3 purchas…Question 217: The accounting year end of a company is 31 December. The company purchased a motor vehicle on 1 January 2020 and incurred the following cos…50 / 72
Question 218: A business sold a non-current asset. It had been purchased for $15 000 and had an estimated life of 10 years, with no residual value. It wa…Question 219: Which statements about a depreciation charge for the year are correct? 1 It is a non-monetary expense. 2 It is debited to the provision for…Question 220: Which item is an example of capital expenditure? A cost of repairs to an office building B cost of repainting business name on delivery van…Question 221: On 1 July 2021, Tim bought a delivery van for $10 000. He paid an additional $900 to have racks fitted inside, and $800 for a year’s insura…Question 222: A business has a year end of 31 December. It purchased a non-current asset on 1 January 2020 for $100 000. The asset was depreciated using …Question 223: Which accounting concepts are not reasons for including depreciation in the income statement? 1 matching 2 materiality 3 prudence 4 realisa…51 / 72
Question 224: On 1 January 2019, a non-current asset was purchased at a cost of $290 000. Delivery and installation costs of $10 000 were also paid. The …Question 225: A sole trader purchased a machine costing $30 000 with an estimated residual value of $5000. It was expected to have a useful life of five …Question 226: A sole trader has changed the method of depreciating his machinery from the reducing balance method in the year 1 to the straight-line meth…Question 227: Paul has a year end of 31 December. On 1 January 2020, he bought a non-current asset for $10 000. He sold it on 1 January 2021 for $8500. P…52 / 72
Question 228: A business depreciates its machinery at 10% per annum using the straight-line method on a month-by-month basis. The business’s financial ye…Question 229: Which item should be treated as capital expenditure? A cost of a printer for an existing computer system B rent paid on a factory, whilst t…Question 230: A business has a financial year end of 31 December. It purchased a vehicle on 1 January 2019 for $30 000. The business depreciates vehicles…Question 231: A trader bought a machine on 1 January 2019. He depreciated it at the rate of 10% per annum using the straight-line method. He sold this ma…Question 232: Which statements about the reducing balance method of depreciation are correct? 1 The annual percentage depreciation rate changes each year…53 / 72
Question 233: On 1 April 2021 a business purchased a machine for $120 000 with an estimated residual value of $12 000. On 1 July 2022 the machine was sol…Question 234: Sue purchased a new machine. She depreciated it at a rate of 40% per annum using the reducing balance method. After two years its net book …Question 235: The following information is available for a business for the year ended 31 March 2022. $ non-current assets at cost at 1 April 2021 62 000…Question 236: Why is it important for a trader to distinguish between capital expenditure and revenue expenditure? 1 to apply the realisation concept 2 t…54 / 72
Question 237: A company purchased a new vehicle for $30 000. It part-exchanged an existing vehicle at a value of $6500, with the balance being paid by ch…Question 238: At 31 December 2021 a business had a non-current asset with a net book value of $18 000. It had been purchased during the year ended 31 Dec…Question 239: A business sold a non-current asset at a profit. What are the entries to be made in a disposal account? debit credit A non-current asset at…Question 240: On 1 January 2020 a business purchased new delivery vehicles. The following information is available. $ total purchase cost 300 000 cost of…55 / 72
Question 241: The following information is available in respect of a trader’s non-current assets. $ accumulated depreciation at 31 May 2020 40 000 deprec…Question 242: Non-current assets at the end of Year 1 were recorded as cost, $500 000, and carrying value, $360 000. During Year 2, certain assets were s…Question 243: Phil purchased new premises and made the following payments. $ premises 60 000 legal fees relating to purchase 2 000 insurance for the fina…56 / 72
Question 244: The delivery cost of a machine purchased for business use has been included in carriage inwards. What is the effect on the profit for the y…Question 245: Which factors are considered when choosing the most appropriate method of calculating depreciation? 1 the benefit received over the years b…Question 246: The carrying value of a company’s non-current assets at the beginning and end of a financial year is shown. $ at 1 January 100 000 at 31 De…Question 247: Which items relating to new manufacturing equipment are capital expenditure? 1 cost of the equipment 2 delivery cost of the equipment 3 sta…57 / 72
Question 248: The financial year of a business ends on 31 December. At the beginning of the financial year, the following payments were made in respect o…Question 249: The motor vehicles at cost account had a balance of $90 000 at the beginning of the year on 1 January. On 1 September in the same year, the…Question 250: Which item is revenue expenditure? A installation costs of machinery B legal fees on the purchase of premises C number plates on a new moto…58 / 72
Question 251: On 1 January, the owner of a business purchased a new machine. All non-current assets are depreciated by 25% per annum. During the year, th…Question 252: What is the purpose of providing for depreciation? A to apply the matching principle B to calculate the true value of non-current assets C …Question 253: A business purchased a vehicle which had cost $27 000 and had an estimated residual value of $1000. Depreciation of $18 200 has been charge…Question 254: Which statement identifies why depreciation is provided on non-current assets? A so that the cost is allocated to periods that benefit from…59 / 72
Question 255: New equipment costing $40 000, with an estimated residual value of $6000, was acquired at the beginning of the year on 1 January. On the sa…Question 256: A business purchased a shop and incurred the following costs. $ purchase price of the shop 680 000 legal fees incurred in the purchase of t…Question 257: A used motor vehicle was part exchanged for a new motor vehicle. The balance of the purchase cost of the new motor vehicle was settled by c…Question 258: A non-current asset of a business cost $300 000 in 2021. It is depreciated using the reducing balance method at the rate of 40% per annum. …60 / 72
Question 259: A business prepared its statement of profit or loss for the year ended 31 December. During that year, on 30 April, a non-current asset had …Question 260: A business incurs the following business expenditure during the year. $ purchase of a machine 9 700 3-year maintenance for the machine 10 0…Question 261: What is a reason for providing for depreciation of non-current assets? A to ensure non-current assets are replaced when they are worn out B…Question 262: A business uses the straight-line method of depreciation. A machine which it has owned for three years has a carrying value of $13 000 at t…61 / 72
Question 263: What are the characteristics of non-current assets? 1 They are not intended for resale. 2 They provide future economic benefits. 3 They pre…Question 264: At the beginning of the financial year on 1 January, a business acquired a new motor vehicle for $34 000. In error, this was recorded in th…Question 265: A company purchased a machine on 1 April 2021 for $25 000. It was depreciated at 20% per annum using the straight-line method. A full year’…Question 266: Why does a business charge depreciation? 1 to be able to replace an asset at the end of its useful life 2 to charge the cost of an asset to…62 / 72
Question 267: The following information relates to the non-current assets of a business that was formed three years ago. $ cost at start of year 1 10 000…Question 268: non-current assets, and depreciation at 10% of cost was charged to the draft statement of profit or loss for the period. In addition the bu…Question 269: Sara bought a non-current asset. Depreciation was provided at the rate of 10% per annum in years 1 and 2. It was sold at a profit in year 3…63 / 72
Question 270: A business buys a vehicle for $10 000 on 1 January Year 1 and sells it for $6500 on 1 January Year 3. The business has depreciated the vehi…Question 271: In a draft statement of profit or loss, two errors were discovered. 1 A profit of $6000 on the disposal of equipment had been treated as a …Question 272: Details regarding the purchase of a non-current asset are as follows: $ cost of new machine 20000 expected residual value 5000 installation…64 / 72
Question 273: A business depreciates its non-current assets at 20% using the straight-line method. Depreciation is calculated on a time basis in the year…Question 274: Non-current assets can be depreciated using a number of methods. How is the most appropriate method decided? A The method chosen improves t…Question 275: Ryan purchased a van for $16000 on 31 December 2021. It is his policy to apply 25% per annum reducing balance depreciation for each part of…Question 276: A business recorded expenditure on improving a non-current asset as revenue expenditure. What is the effect of this error on the carrying v…65 / 72
Question 277: A car dealer and garage owner has the following vehicles at her premises. 1 breakdown truck for recovering customers’ vehicles 2 new cars i…Question 278: The table shows details of a freehold property. $ historical cost 80000 depreciation 25000 The property is to be shown in the statement of …Question 279: The following information relates to the motor vehicles of a business. 1 January 2021 31 December 2021 $ $ carrying value 398000 480000 Dur…66 / 72
Question 280: A business owns a property which is rented out to tenants. Which of the following costs should be treated as capital expenditure? A extendi…Question 281: Which statements describe factors that may cause a non-current asset to depreciate? 1 a reduction in the estimated residual value of the no…Question 282: A business purchased a non-current asset which had an estimated life of 10 years. It is depreciated using the straight-line method. At the …Question 283: Which accounting concepts are applied when depreciating non-current assets? 1 consistency 2 matching/accruals 3 objectivity 4 prudence A 1 …67 / 72
Question 284: The financial statements were prepared using the following details. $ purchase cost of machinery (included $450 for 16950 repairs to the ma…Question 285: What is the purpose of depreciating a non-current asset? A to allocate its cost over its useful life B to reflect its market value C to ref…Question 286: The non-current assets of a business are shown in the table. end of the year start of the year $ $ cost 360000 300000 accumulated depreciat…Question 287: A business owns a property which is rented out to tenants. Which of the following costs should be treated as capital expenditure? A extendi…68 / 72
Question 288: Which statements describe factors that may cause a non-current asset to depreciate? 1 a reduction in the estimated residual value of the no…Question 289: A business purchased a non-current asset which had an estimated life of 10 years. It is depreciated using the straight-line method. At the …Question 290: The owner of a business recently purchased a new delivery vehicle and made the payments shown. $ delivery vehicle 28000 fitting shelves in …69 / 72
Question 291: Motor vehicles purchased for $530000, at the start of the year, have been incorrectly depreciated for the whole year, using the straight-li…Question 292: Vehicle X was purchased for $80000. It had a useful life of five years and was expected to be sold for $5000 at the end of its useful life.…Question 293: An item of capital expenditure has been treated as revenue expenditure. What is the effect on the non-current assets and on the loss for th…70 / 72
Question 294: Y Limited purchased a motor van and incurred the following expenditure at the beginning of the year. $ motor van 50000 delivery of motor va…Question 295: A business charges depreciation on its property using the straight-line method. At the start of the year, the business revalued its propert…Question 296: X Limited purchased a property for $100 000 on 1 January 2010. The property had an expected useful life of 50 years. On 1 January 2024, the…Question 297: What are correct descriptions of revenue and capital expenditure? 1 Capital expenditure includes the cost of improving non-current assets. …71 / 72
Question 298: A business has a financial year end of 31 December. New production machinery was purchased on 1 July in the current financial year. The bus…Question 299: A new business is deciding upon the methods to use for calculating depreciation on non-current assets. Which statements are correct? 1 Redu…Question 300: A company has two non-current assets. Details are as follows: cost residual asset date purchased depreciation method $ value X 1 Jan 2023 1…72 / 72

Mark scheme300 answers

Answers below. Sit the paper first if you are practising.

Pastlit

Accounting 9706 · Accounting for non-current assets — Paper 1

A Level · topical answer key — answer key (teacher use)

Question

Answer

Marks

1A1
2C1
3C1
4B1
5B1
6B1
7C1
8C1
9A1
10A1
11B1
12A1
13B1
14B1
15D1
16A1
17D1
18D1
19A1
20B1
21A1
22D1
23A1
24A1
25D1
26C1
27C1
28C1
29D1
30C1
31C1
32D1
33D1
34B1
35C1
36B1
37D1
38C1
39A1
40A1
41C1
42B1
43A1
44B1
45A1
46C1
47A1
48B1
49B1
1 / 7

Pastlit

Accounting 9706 · Accounting for non-current assets — Paper 1

A Level · topical answer key — answer key (teacher use)

Question

Answer

Marks

50A1
51D1
52B1
53B1
54D1
55B1
56A1
57C1
58A1
59D1
60B1
61C1
62A1
63C1
64C1
65B1
66A1
67A1
68D1
69D1
70C1
71B1
72B1
73C1
74B1
75B1
76C1
77C1
78A1
79A1
80C1
81B1
82C1
83B1
84D1
85A1
86C1
87D1
88B1
89A1
90C1
91C1
92B1
93A1
94A1
95D1
96A1
97C1
98D1
2 / 7

Pastlit

Accounting 9706 · Accounting for non-current assets — Paper 1

A Level · topical answer key — answer key (teacher use)

Question

Answer

Marks

99C1
100B1
101B1
102A1
103A1
104A1
105D1
106A1
107C1
108B1
109A1
110B1
111A1
112C1
113A1
114B1
115C1
116C1
117B1
118D1
119D1
120A1
121A1
122B1
123D1
124B1
125C1
126C1
127B1
128A1
129C1
130A1
131B1
132C1
133C1
134A1
135A1
136B1
137D1
138A1
139C1
140B1
141C1
142C1
143B1
144A1
145D1
146B1
147A1
3 / 7

Pastlit

Accounting 9706 · Accounting for non-current assets — Paper 1

A Level · topical answer key — answer key (teacher use)

Question

Answer

Marks

148C1
149B1
150D1
151C1
152B1
153A1
154C1
155A1
156C1
157B1
158B1
159C1
160D1
161A1
162D1
163D1
164C1
165D1
166B1
167A1
168D1
169C1
170C1
171C1
172B1
173C1
174B1
175C1
176B1
177A1
178D1
179D1
180D1
181D1
182B1
183D1
184C1
185A1
186C1
187B1
188C1
189C1
190A1
191C1
192B1
193A1
194C1
195A1
196C1
4 / 7

Pastlit

Accounting 9706 · Accounting for non-current assets — Paper 1

A Level · topical answer key — answer key (teacher use)

Question

Answer

Marks

197D1
198A1
199B1
200C1
201D1
202C1
203B1
204C1
205A1
206A1
207B1
208C1
209D1
210A1
211B1
212C1
213C1
214D1
215D1
216A1
217B1
218C1
219B1
220C1
221A1
222B1
223D1
224A1
225C1
226D1
227B1
228C1
229A1
230C1
231B1
232D1
233D1
234C1
235B1
236D1
237A1
238D1
239B1
240B1
241A1
242A1
243B1
244D1
245A1
5 / 7

Pastlit

Accounting 9706 · Accounting for non-current assets — Paper 1

A Level · topical answer key — answer key (teacher use)

Question

Answer

Marks

246A1
247A1
248B1
249B1
250D1
251C1
252A1
253C1
254A1
255B1
256C1
257D1
258A1
259A1
260A1
261B1
262C1
263A1
264B1
265C1
266B1
267C1
268C1
269C1
270A1
271A1
272C1
273B1
274D1
275B1
276D1
277B1
278B1
279C1
280A1
281D1
282C1
283C1
284A1
285A1
286D1
287A1
288D1
289C1
290D1
291A1
292B1
293C1
294B1
6 / 7

Pastlit

Accounting 9706 · Accounting for non-current assets — Paper 1

A Level · topical answer key — answer key (teacher use)

Question

Answer

Marks

295D1
296D1
297A1
298D1
299B1
300A1
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Questions as text

Q1 · Which item should be treated as capital expenditure? 9706/11 May/June 2006

1 Which item should be treated as capital expenditure? A the cost of a printer for an existing computer system B repair costs to a car which are not covered by insurance C rent paid on a factory, whilst the company negotiated the purchase of the factory D the replacement of a wooden fence with a new fence

1 marks

Answer: A

This question in 9706/11 May/June 2006

Q2 · A business uses the straight line method to provide for depreciation of equipment 9706/11 May/June 2006

5 A business uses the straight line method to provide for depreciation of equipment. Why should it continue to use this method in subsequent years? A accounting principles never allow accounting methods to be changed B other methods of depreciation are unsuitable for depreciating equipment C to ensure that profits are stated on a consistent basis over time D to ensure that the Balance Sheet always shows the market value for equipment

1 marks

Answer: C

This question in 9706/11 May/June 2006

Q3 · Which accounting policies illustrate the matching principle? 9706/11 May/June 2006

7 Which accounting policies illustrate the matching principle? 1 charging depreciation on fixed assets 2 revaluing fixed assets on a regular basis 3 using the reducing balance method of depreciation A 1, 2 and 3 B 1 and 2 only C 1 and 3 only D 2 and 3 only

1 marks

Answer: C

This question in 9706/11 May/June 2006

Q4 · What would be treated as part of the capital cost of the purchase of a building? 9706/11 Oct/Nov 2006

1 What would be treated as part of the capital cost of the purchase of a building? 1 legal costs of the purchase 2 redecoration of the building 3 installation of air conditioning needed for the machinery in the building A 1 only B 1 and 3 only C 2 and 3 only D 1, 2 and 3

1 marks

Answer: B

This question in 9706/11 Oct/Nov 2006

Q5 · The following information relates to a company’s fixed assets at 31 December: cost price… 9706/11 Oct/Nov 2006

6 The following information relates to a company’s fixed assets at 31 December: cost price disposal value $ $ motor vehicles 25 000 18 000 equipment 48 000 36 000 fixtures and fittings 12 000 5 000 The company has a serious cash shortage and will cease to trade within the next two months. What is the total value for fixed assets in the company’s Balance Sheet at 31 December? A $26 000 B $59 000 C $85 000 D $144 000

1 marks

Answer: B

This question in 9706/11 Oct/Nov 2006

Q6 · Which item is revenue expenditure? 9706/11 May/June 2007

1 Which item is revenue expenditure? A cost of painting new office premises during construction B cost of repairs to factory plant and machinery C legal fees for the purchase of new factory premises D wages of a company’s own workmen for building an office extension

1 marks

Answer: B

This question in 9706/11 May/June 2007

Q7 · On 1 October 2004 a company purchased machinery for $26 000 9706/11 May/June 2007

3 On 1 October 2004 a company purchased machinery for $26 000. It was decided to depreciate the asset using the reducing balance method at a rate of 20 % per annum. On 30 September 2006 the asset was sold for $12 000. What is the profit or loss on disposal? A $3600 loss B $3600 profit C $4640 loss D $4640 profit

1 marks

Answer: C

This question in 9706/11 May/June 2007

Q8 · When is it necessary to distinguish between revenue and capital expenditure? 9706/11 May/June 2008

1 When is it necessary to distinguish between revenue and capital expenditure? A when preparing cash budgets B when preparing investment appraisal calculations C when preparing profit and loss accounts D when preparing purchase ledger control accounts

1 marks

Answer: C

This question in 9706/11 May/June 2008

Q9 · The table gives information relating to the fixed assets of a business 9706/11 May/June 2008

3 The table gives information relating to the fixed assets of a business. $ net book value at the end of the year 25 000 net book value at the beginning of the year 16 000 depreciation charge for the year 5 000 additions at cost during the year 22 000 What is the net book value of disposals during the year? A $8000 B $11 000 C $18 000 D $22 000

1 marks

Answer: A

This question in 9706/11 May/June 2008

Q10 · A company has two fixed assets 9706/11 May/June 2008

5 A company has two fixed assets. Details are given in the table. cost residual asset date bought depreciation method $ value X 1 Jan, Year 1 10 000 straight line life 5 years $2000 Y 1 Jan, Year 1 20 000 reducing balance rate 20 % nil What is the depreciation charge for the year ended 31 December, Year 2? A $4800 B $5200 C $5600 D $6000

1 marks

Answer: A

This question in 9706/11 May/June 2008

Q11 · Which transaction applies the matching concept? 9706/11 May/June 2008

6 Which transaction applies the matching concept? A a machine acquired on long-term rental is included in fixed assets B computer equipment is depreciated over two years C a building is revalued following a fall in property prices D a waste-paper basket is treated as revenue expenditure

1 marks

Answer: B

This question in 9706/11 May/June 2008

Q12 · Which item should be treated as capital expenditure? 9706/11 Oct/Nov 2008

1 Which item should be treated as capital expenditure? A cost of carriage on the purchase of a fixed asset B cost of replacement of part of a fixed asset C depreciation of a fixed asset D repairs to a fixed asset

1 marks

Answer: A

This question in 9706/11 Oct/Nov 2008

Q13 · An item of machinery cost $60 000 9706/11 Oct/Nov 2008

3 An item of machinery cost $60 000. The machinery was later sold for $8000 and the loss on disposal was $3000. What was the accumulated depreciation on the machinery on disposal? A $46 000 B $49 000 C $52 000 D $55 000

1 marks

Answer: B

This question in 9706/11 Oct/Nov 2008

Q14 · The table shows how a property appears in the balance sheet 9706/11 Oct/Nov 2008

5 The table shows how a property appears in the balance sheet. $ land and buildings 100 000 accumulated depreciation (40 000) net book value 60 000 The land and buildings are revalued to $150 000. What is the journal entry to record the revaluation? Dr Cr $ $ A land and buildings 50 000 profit and loss account 50 000 B land and buildings 50 000 accumulated depreciation 40 000 revaluation reserve 90 000 C land and buildings 50 000 revaluation reserve 50 000 D land and buildings 90 000 revaluation reserve 90 000

1 marks

Answer: B

This question in 9706/11 Oct/Nov 2008

Q15 · Why do businesses charge depreciation on their fixed assets? 9706/11 Oct/Nov 2008

6 Why do businesses charge depreciation on their fixed assets? A to ensure that sufficient cash is available to replace the assets B to show the realisable value of the assets in the balance sheet C to show when the assets must be replaced D to spread the cost of the assets over their estimated useful lives

1 marks

Answer: D

This question in 9706/11 Oct/Nov 2008

Q16 · A company’s capital expenditure of $200 000 has been debited in error to the purchases… 9706/11 Oct/Nov 2008

12 A company’s capital expenditure of $200 000 has been debited in error to the purchases account. Depreciation is provided at the rate of 15 % per annum on the cost of all fixed assets held at each year end. How will this affect the net profit? A $170 000 understated B $200 000 overstated C $200 000 understated D $230 000 overstated

1 marks

Answer: A

This question in 9706/11 Oct/Nov 2008

Q17 · A vehicle cost $30 000 9706/11 May/June 2009

1 A vehicle cost $30 000. The vehicle was later sold for $9000 and the profit on disposal was $1500. What was the accumulated depreciation of the vehicle on disposal? A $7500 B $9000 C $21 000 D $22 500

1 marks

Answer: D

This question in 9706/11 May/June 2009

Q18 · A transport business owned by a sole proprietor purchases a motor vehicle 9706/11 May/June 2009

2 A transport business owned by a sole proprietor purchases a motor vehicle. This is charged to the Motor expenses account. What are the effects of this on the end-of-year balance sheet? A fixed assets understated current assets understated B fixed assets overstated current assets overstated C fixed assets overstated capital account overstated D fixed assets understated capital account understated

1 marks

Answer: D

This question in 9706/11 May/June 2009

Q19 · A business buys a computer for $2200 on 1 January 2007 9706/11 May/June 2009

3 A business buys a computer for $2200 on 1 January 2007. The computer will be used for four years, after which time it will be sold for $280. The business uses the straight-line method of depreciation. What is the depreciation charge for the year ended 31 December 2008? A $480 B $550 C $960 D $1100

1 marks

Answer: A

This question in 9706/11 May/June 2009

Q20 · A company’s policy is to depreciate its equipment by 30 % annually using the reducing… 9706/11 May/June 2009

12 A company’s policy is to depreciate its equipment by 30 % annually using the reducing balance method. A piece of equipment which was two years old was sold for $6000 and the profit on sale was $1590. What was the cost price of the equipment? A $7590 B $9000 C $9600 D $11 025

1 marks

Answer: B

This question in 9706/11 May/June 2009

Q21 · A business purchases a vehicle for $10 000 9706/11 May/June 2010

1 A business purchases a vehicle for $10 000. The business depreciates its non current (fixed) assets at 20 % using the diminishing value method. What is the depreciation charge for year 2? A $1600 B $2000 C $6400 D $8000

1 marks

Answer: A

This question in 9706/11 May/June 2010

Q22 · An item of capital expenditure has been incorrectly treated as revenue expenditure in the… 9706/12 May/June 2010

1 An item of capital expenditure has been incorrectly treated as revenue expenditure in the accounts of a business. What is the effect of this error on the accounts of the business? assets profit A overstated overstated B overstated understated C understated overstated D understated understated

1 marks

Answer: D

This question in 9706/12 May/June 2010

Q23 · A business purchases a vehicle for $10 000 9706/12 May/June 2010

30 A business purchases a vehicle for $10 000. The business depreciates its non current (fixed) assets at 20 % using the diminishing value method. What is the depreciation charge for year 2? A $1600 B $2000 C $6400 D $8000

1 marks

Answer: A

This question in 9706/12 May/June 2010

Q24 · A business purchases a vehicle for $10 000 9706/13 May/June 2010

29 A business purchases a vehicle for $10 000. The business depreciates its non current (fixed) assets at 20 % using the diminishing value method. What is the depreciation charge for year 2? A $1600 B $2000 C $6400 D $8000

1 marks

Answer: A

This question in 9706/13 May/June 2010

Q25 · An item of capital expenditure has been incorrectly treated as revenue expenditure in the… 9706/13 May/June 2010

30 An item of capital expenditure has been incorrectly treated as revenue expenditure in the accounts of a business. What is the effect of this error on the accounts of the business? assets profit A overstated overstated B overstated understated C understated overstated D understated understated

1 marks

Answer: D

This question in 9706/13 May/June 2010

Q26 · Non current (fixed) assets of a company were: start of year end of year $ $ at cost 460… 9706/11 Oct/Nov 2010

3 Non current (fixed) assets of a company were: start of year end of year $ $ at cost 460 000 505 000 cumulative depreciation 215 000 237 000 net book value 245 000 268 000 During the year non current (fixed) assets costing $92 000 were purchased and non current (fixed) assets with a net book value of $16 000 were sold. What was the depreciation charge for the year? A $22 000 B $23 000 C $53 000 D $69 000

1 marks

Answer: C

This question in 9706/11 Oct/Nov 2010

Q27 · Non current (fixed) assets of a company were: start of year end of year $ $ at cost 460… 9706/12 Oct/Nov 2010

3 Non current (fixed) assets of a company were: start of year end of year $ $ at cost 460 000 505 000 cumulative depreciation 215 000 237 000 net book value 245 000 268 000 During the year non current (fixed) assets costing $92 000 were purchased and non current (fixed) assets with a net book value of $16 000 were sold. What was the depreciation charge for the year? A $22 000 B $23 000 C $53 000 D $69 000

1 marks

Answer: C

This question in 9706/12 Oct/Nov 2010

Q28 · Non current (fixed) assets of a company were: start of year end of year $ $ at cost 460… 9706/13 Oct/Nov 2010

2 Non current (fixed) assets of a company were: start of year end of year $ $ at cost 460 000 505 000 cumulative depreciation 215 000 237 000 net book value 245 000 268 000 During the year non current (fixed) assets costing $92 000 were purchased and non current (fixed) assets with a net book value of $16 000 were sold. What was the depreciation charge for the year? A $22 000 B $23 000 C $53 000 D $69 000

1 marks

Answer: C

This question in 9706/13 Oct/Nov 2010

Q29 · The non-current assets of a business are shown 9706/11 May/June 2011

2 The non-current assets of a business are shown. end of year start of year $ $ cost 360 000 300 000 accumulated depreciation 120 000 75 000 net book value 240 000 225 000 During the year, non-current assets costing $110 000 were bought and non-current assets with a net book value of $20 000 were sold. What was the depreciation charge for the year? A $35 000 B $45 000 C $50 000 D $75 000

1 marks

Answer: D

This question in 9706/11 May/June 2011

Q30 · How should goodwill be treated by a limited company? 9706/11 May/June 2011

15 How should goodwill be treated by a limited company? A Goodwill should always be written off immediately. B Non-purchased goodwill is shown in the balance sheet. C Purchased goodwill is shown in the balance sheet and written off over its useful life. D Purchased goodwill remains on the balance sheet as a permanent item.

1 marks

Answer: C

This question in 9706/11 May/June 2011

Q31 · How should goodwill be treated by a limited company? 9706/12 May/June 2011

7 How should goodwill be treated by a limited company? A Goodwill should always be written off immediately. B Non-purchased goodwill is shown in the balance sheet. C Purchased goodwill is shown in the balance sheet and written off over its useful life. D Purchased goodwill remains on the balance sheet as a permanent item.

1 marks

Answer: C

This question in 9706/12 May/June 2011

Q32 · The non-current assets of a business are shown 9706/12 May/June 2011

11 The non-current assets of a business are shown. end of year start of year $ $ cost 360 000 300 000 accumulated depreciation 120 000 75 000 net book value 240 000 225 000 During the year, non-current assets costing $110 000 were bought and non-current assets with a net book value of $20 000 were sold. What was the depreciation charge for the year? A $35 000 B $45 000 C $50 000 D $75 000

1 marks

Answer: D

This question in 9706/12 May/June 2011

Q33 · The non-current assets of a business are shown 9706/13 May/June 2011

3 The non-current assets of a business are shown. end of year start of year $ $ cost 360 000 300 000 accumulated depreciation 120 000 75 000 net book value 240 000 225 000 During the year, non-current assets costing $110 000 were bought and non-current assets with a net book value of $20 000 were sold. What was the depreciation charge for the year? A $35 000 B $45 000 C $50 000 D $75 000

1 marks

Answer: D

This question in 9706/13 May/June 2011

Q34 · A business purchases a machine for $3200 9706/11 Oct/Nov 2011

1 A business purchases a machine for $3200. It is estimated that it will have a useful life of 5 years and a residual value of $700. Straight line depreciation is charged each year. What is the net book value at the end of year 2? A $1920 B $2200 C $2560 D $2700

1 marks

Answer: B

This question in 9706/11 Oct/Nov 2011

Q35 · The following information relates to the non-current assets of a business formed three… 9706/11 Oct/Nov 2011

15 The following information relates to the non-current assets of a business formed three years ago. $ cost at start of year 1 10 000 accumulated depreciation at end of year 3 6 000 profit for year 3 18 000 Depreciation has been consistently charged using the straight line method. What would the profit be in year 3 if the method of depreciation for that year is changed to the reducing balance method at a rate of 25 %? A $16 500 B $17 500 C $18 500 D $19 000

1 marks

Answer: C

This question in 9706/11 Oct/Nov 2011

Q36 · Expenditure on a machine during a year has included the following 9706/12 Oct/Nov 2011

2 Expenditure on a machine during a year has included the following. $ insurance costs 2 400 new engine – machine will now produce more products per hour 22 300 cleaning costs 7 200 How much of this expenditure should be treated as capital expenditure? A none B $22 300 C $24 700 D $31 900

1 marks

Answer: B

This question in 9706/12 Oct/Nov 2011

Q37 · What should companies not show as non-current assets in their balance sheets? 9706/12 Oct/Nov 2011

3 What should companies not show as non-current assets in their balance sheets? A plant bought on hire purchase B plant fully depreciated C plant held on finance leases D plant held on operating leases

1 marks

Answer: D

This question in 9706/12 Oct/Nov 2011

Q38 · Which accounting policies illustrate the matching principle? 9706/12 Oct/Nov 2011

4 Which accounting policies illustrate the matching principle? 1 charging depreciation on non-current assets 2 revaluing non-current assets on a irregular basis 3 using the reducing balance method of depreciation A 1, 2 and 3 B 1 and 2 only C 1 and 3 only D 2 and 3 only

1 marks

Answer: C

This question in 9706/12 Oct/Nov 2011

Q39 · Why is a provision for depreciation made in the financial statements? 9706/12 Oct/Nov 2011

17 Why is a provision for depreciation made in the financial statements? A to charge the cost of non-current assets against profits B to make a provision for repairs C to make cash available to replace non-current assets when necessary D to show the current market values of non-current assets

1 marks

Answer: A

This question in 9706/12 Oct/Nov 2011

Q40 · A company has been depreciating its IT equipment over 5 years, but now finds that it is… 9706/13 Oct/Nov 2011

5 A company has been depreciating its IT equipment over 5 years, but now finds that it is becoming obsolete in 3 years. What does the consistency principle permit the company to do? A change the depreciation policy to 3 years and highlight the effect of this in its financial statements B change the depreciation policy to 3 years without indicating the effect on profits C continue to depreciate over 5 years as per the existing policy D continue to depreciate over 5 years but note that after 3 years the equipment will be obsolete

1 marks

Answer: A

This question in 9706/13 Oct/Nov 2011

Q41 · The following information relates to the non-current assets of a business formed three… 9706/13 Oct/Nov 2011

14 The following information relates to the non-current assets of a business formed three years ago. $ cost at start of year 1 10 000 accumulated depreciation at end of year 3 6 000 profit for year 3 18 000 Depreciation has been consistently charged using the straight line method. What would the profit be in year 3 if the method of depreciation for that year is changed to the reducing balance method at a rate of 25 %? A $16 500 B $17 500 C $18 500 D $19 000

1 marks

Answer: C

This question in 9706/13 Oct/Nov 2011

Q42 · A business purchases a machine for $3200 9706/13 Oct/Nov 2011

30 A business purchases a machine for $3200. It is estimated that it will have a useful life of 5 years and a residual value of $700. Straight line depreciation is charged each year. What is the net book value at the end of year 2? A $1920 B $2200 C $2560 D $2700

1 marks

Answer: B

This question in 9706/13 Oct/Nov 2011

Q43 · Which asset is often revalued in a business’s accounts? 9706/11 May/June 2012

1 Which asset is often revalued in a business’s accounts? A buildings B inventory C IT equipment D trade receivables

1 marks

Answer: A

This question in 9706/11 May/June 2012

Q44 · A non-current asset costing $206 000, with a net book value of $131 000, is revalued to… 9706/12 May/June 2012

3 A non-current asset costing $206 000, with a net book value of $131 000, is revalued to $275 000. How should the revaluation be recorded? A Dr Asset at cost $69 000 Cr Revaluation reserve $69 000 B Dr Provision for depreciation $75 000 Dr Asset at cost $69 000 Cr Revaluation reserve $144 000 C Dr Provision for depreciation $144 000 Cr Revaluation reserve $144 000 D Dr Revaluation reserve $144 000 Cr Asset at cost $69 000 Cr Provision for depreciation $75 000

1 marks

Answer: B

This question in 9706/12 May/June 2012

Q45 · Which asset is often revalued in a business’s accounts? 9706/13 May/June 2012

3 Which asset is often revalued in a business’s accounts? A buildings B inventory C IT equipment D trade receivables

1 marks

Answer: A

This question in 9706/13 May/June 2012

Q46 · A business sells a non-current asset for cash 9706/11 Oct/Nov 2012

17 A business sells a non-current asset for cash. The disposal account includes entries for the cost of the asset and the sales proceeds. Which books of prime entry are used? cost sales proceeds A cash book general journal B cash book sales journal C general journal cash book D purchases journal cash book

1 marks

Answer: C

This question in 9706/11 Oct/Nov 2012

Q47 · A business buys a vehicle for $10 000 on 1 January Year 1 and sells it for $6500 on 1… 9706/11 Oct/Nov 2012

18 A business buys a vehicle for $10 000 on 1 January Year 1 and sells it for $6500 on 1 January Year 3, having depreciated it at 10 % a year using the straight line method. The company provides a full year’s depreciation in the year of purchase and none in the year of disposal. Which amount for profit or loss will appear in the disposal account and on what side of the disposal account will it be shown? A $1500 on the credit side B $1500 on the debit side C $2500 on the credit side D $2500 on the debit side

1 marks

Answer: A

This question in 9706/11 Oct/Nov 2012

Q48 · Which item is revenue expenditure? 9706/12 Oct/Nov 2012

2 Which item is revenue expenditure? A cost of painting new office premises during construction B cost of repairs to factory plant and machinery C legal fees for the purchase of new factory premises D wages of a company’s own workmen for building an office extension

1 marks

Answer: B

This question in 9706/12 Oct/Nov 2012

Q49 · A company uses the straight-line method of depreciation for all its non-current assets 9706/12 Oct/Nov 2012

18 A company uses the straight-line method of depreciation for all its non-current assets. On 1 January the company bought machinery on hire purchase. The cash price was $115 000 and the interest for the year is $19 550. The estimated useful life of the machinery is five years with no residual value. What is the charge for depreciation for the year ended 31 December? A $19 090 B $23 000 C $26 910 D $42 550

1 marks

Answer: B

This question in 9706/12 Oct/Nov 2012

Question 50 9706/13 Oct/Nov 2012

3 A. Spender owns a road haulage business. What would be classified as capital expenditure? A number plates for new lorries B replacement fuel pump for lorries C replacement tyres for lorries D road tax licence for new lorries

1 marks

Answer: A

This question in 9706/13 Oct/Nov 2012

Q51 · Which statement is correct? 9706/13 Oct/Nov 2012

5 Which statement is correct? A Assets cannot be revalued by companies at all. B Companies have to disclose their policy on revaluation in their accounts. C Companies must carry out revaluations every year. D Every asset in a particular class must be revalued by companies, not just one.

1 marks

Answer: D

This question in 9706/13 Oct/Nov 2012

Q52 · A business purchased a machine for $10 000 at the beginning of year 1 9706/13 Oct/Nov 2012

18 A business purchased a machine for $10 000 at the beginning of year 1. The machine was depreciated using the reducing balance method at 30 % per year. The business sold the machine after the end of year 2 for $5000. What was the profit or loss on disposal of the machine? A $100 loss B $100 profit C $1000 loss D $1000 profit

1 marks

Answer: B

This question in 9706/13 Oct/Nov 2012

Q53 · The table below shows how a non-current asset appears in the statement of financial… 9706/11 May/June 2013

6 The table below shows how a non-current asset appears in the statement of financial position. $ non-current asset at cost 120 000 accumulated depreciation (18 000) net book value 102 000 The asset is revalued to $136 000. What is the journal entry to record the revaluation? debit credit $ $ A non-current asset at cost 16 000 income statement 16 000 B non-current asset at cost 16 000 accumulated depreciation 18 000 revaluation reserve 34 000 C non-current asset at cost 34 000 revaluation reserve 34 000 D non-current asset at cost 16 000 revaluation reserve 16 000

1 marks

Answer: B

This question in 9706/11 May/June 2013

Q54 · A vehicle was part exchanged for a new vehicle 9706/11 May/June 2013

7 A vehicle was part exchanged for a new vehicle. Which entries record the part exchange? account debited account credited A cash motor vehicles B disposal motor vehicles C motor vehicles cash D motor vehicles disposal

1 marks

Answer: D

This question in 9706/11 May/June 2013

Q55 · A vehicle cost $12 000 and its estimated residual value was $2000 9706/11 May/June 2013

19 A vehicle cost $12 000 and its estimated residual value was $2000. The vehicle was depreciated at 25% per annum using the straight line method. After three years the vehicle was sold for $3500. What was the profit or loss on disposal? A $500 profit B $1000 loss C $1000 profit D $4500 loss

1 marks

Answer: B

This question in 9706/11 May/June 2013

Q56 · A vehicle is sold for $1000 9706/12 May/June 2013

18 A vehicle is sold for $1000. It had cost $6000 and $2800 depreciation had been provided on it. What is the profit or loss on disposal? A loss $2200 B loss $4200 C profit $2200 D profit $4200

1 marks

Answer: A

This question in 9706/12 May/June 2013

Q57 · The table shows information relating to the non-current assets of a business 9706/13 May/June 2013

4 The table shows information relating to the non-current assets of a business. $ net book value at the beginning of year 28 000 net book value at end of year 25 000 depreciation charge for the year 4 000 disposals at net book value 9 000 What is the cost of non-current asset additions? A $2000 B $6000 C $10 000 D $16 000

1 marks

Answer: C

This question in 9706/13 May/June 2013

Q58 · ABC Ltd purchased a non-current asset for $35 000 on 1 April 2009 and sold it on 1… 9706/13 May/June 2013

19 ABC Ltd purchased a non-current asset for $35 000 on 1 April 2009 and sold it on 1 October 2012 for $14 500. The company’s year end is 31 December and their policy is to make no charge for depreciation in the year of disposal but a full year’s charge in the year of purchase. The company uses the reducing balance method at the rate of 25% per annum. What is the profit or loss made, to the nearest $, on the disposal of the asset? A $265 loss B $265 profit C $5188 loss D $5188 profit

1 marks

Answer: A

This question in 9706/13 May/June 2013

Q59 · A non-current asset costs $250 000 and has a useful economic life of 25 years 9706/11 Oct/Nov 2013

1 A non-current asset costs $250 000 and has a useful economic life of 25 years. The estimated residual value is $10 000. Depreciation is provided on a straight line basis. After 10 years the asset is sold for $120 000. Disposal costs of $20 000 are incurred. What is the loss on disposal? A $30 000 B $34 000 C $50 000 D $54 000

1 marks

Answer: D

This question in 9706/11 Oct/Nov 2013

Q60 · Anna owns a plumbing business 9706/12 Oct/Nov 2013

3 Anna owns a plumbing business. Costs for the year were $49 500 for wages and $95 000 for materials. These included $2200 labour and $540 materials used by Anna in the extension of the business premises. Additional planning and legal costs of the extension were $450. What was Anna’s total revenue expenditure for the year? A $141 310 B $141 760 C $142 300 D $144 500

1 marks

Answer: B

This question in 9706/12 Oct/Nov 2013

Q61 · A building cost $340 000 9706/12 Oct/Nov 2013

4 A building cost $340 000. The accumulated depreciation on the building was $47 600. It was decided to revalue the building to its market value of $560 000. What is the balance on the revaluation reserve? A $172 400 B $220 000 C $267 600 D $512 400

1 marks

Answer: C

This question in 9706/12 Oct/Nov 2013

Q62 · The table shows extracts from the statements of financial position of a business 9706/12 Oct/Nov 2013

5 The table shows extracts from the statements of financial position of a business. 2011 2012 $ $ non-current assets (at cost) 190 000 245 000 less accumulated depreciation 75 000 90 000 115 000 155 000 Other information for the financial year 2012 is as follows. $ depreciation charged 40 000 new non-current assets purchased (at cost) 105 000 loss on sale of non-current assets 10 000 Which amount was received from the sales of the non-current assets? A $15 000 B $25 000 C $30 000 D $35 000

1 marks

Answer: A

This question in 9706/12 Oct/Nov 2013

Q63 · A vehicle is sold for $1500 9706/12 Oct/Nov 2013

20 A vehicle is sold for $1500. It cost $5000 and $3000 depreciation had been provided on it. Which entry is needed to close the disposal account? debit $ credit $ A disposal account 500 income statement 500 B disposal account 3500 income statement 3500 C income statement 500 disposal account 500 D income statement 3500 disposal account 3500

1 marks

Answer: C

This question in 9706/12 Oct/Nov 2013

Q64 · What would be treated as part of the capital cost of the purchase of a building? 9706/13 Oct/Nov 2013

6 What would be treated as part of the capital cost of the purchase of a building? 1 legal costs of the purchase 2 redecoration of the building 3 installation of air conditioning needed for the machinery in the building A 1 only B 1, 2 and 3 C 1 and 3 only D 2 and 3 only

1 marks

Answer: C

This question in 9706/13 Oct/Nov 2013

Q65 · Ryan purchased a van for $16 000 on 31 December 2010 9706/13 Oct/Nov 2013

7 Ryan purchased a van for $16 000 on 31 December 2010. It is his policy to apply 25% per annum reducing balance depreciation for each part of the year the asset is held. Ryan traded the vehicle in on 1 July 2013 for a $6150 reduction on the cost of a new vehicle. What was the profit or loss made on the disposal of the van? A $600 loss B $1725 loss C $150 profit D $2150 profit

1 marks

Answer: B

This question in 9706/13 Oct/Nov 2013

Q66 · Which statement about goodwill is correct? 9706/13 Oct/Nov 2013

17 Which statement about goodwill is correct? A Internally generated goodwill should be omitted from the statement of financial position. B Purchased goodwill should be classed as a tangible non-current asset. C Purchased goodwill should be omitted from the statement of financial position. D The value of goodwill should never be included in the statement of financial position.

1 marks

Answer: A

This question in 9706/13 Oct/Nov 2013

Q67 · A trader uses the revaluation method of depreciation for loose tools 9706/13 Oct/Nov 2013

19 A trader uses the revaluation method of depreciation for loose tools. On 1 January loose tools were valued at $4620 and on 31 December at $5740. During the year $2010 was spent on purchasing new loose tools. Which amount was charged to the income statement? A $890 B $1120 C $2010 D $3130

1 marks

Answer: A

This question in 9706/13 Oct/Nov 2013

Q68 · What is the reason for providing depreciation on non-current assets? 9706/13 Oct/Nov 2013

20 What is the reason for providing depreciation on non-current assets? A to provide sufficient funds to replace the non-current assets B to show the assets at replacement cost on the statement of financial position C to show the fall in value of the assets in the income statement D to spread the cost of the assets over their estimated useful lives

1 marks

Answer: D

This question in 9706/13 Oct/Nov 2013

Q69 · A business has a non-current asset turnover of two times, based on non-current assets… 9706/13 Oct/Nov 2013

24 A business has a non-current asset turnover of two times, based on non-current assets valued at $250 000 at the end of 2011. The company uses the reducing balance method to depreciate its non-current assets at 25% per annum. In 2012 sales revenue increased by 20%. There were no purchases or disposals of non-current assets during the year. What is the non-current asset turnover for 2012? A 2.13 times B 2.40 times C 2.67 times D 3.20 times

1 marks

Answer: D

This question in 9706/13 Oct/Nov 2013

Q70 · A new machine is purchased at a price of $75 000 9706/11 May/June 2014

4 A new machine is purchased at a price of $75 000. In addition, delivery and installation cost is $2500. The business depreciates all non-current assets at a rate of 20% per annum using the straight line method. By how much would this transaction decrease the profit for the year? A $14 500 B $15 000 C $15 500 D $17 500

1 marks

Answer: C

This question in 9706/11 May/June 2014

Q71 · Which costs may be capitalised as land and buildings? 9706/11 May/June 2014

5 Which costs may be capitalised as land and buildings? 1 construction cost of an extension 2 insurance premium 3 legal fees on purchase 4 redecoration costs A 1 and 2 B 1 and 3 C 2 and 4 D 3 and 4

1 marks

Answer: B

This question in 9706/11 May/June 2014

Q72 · June purchased a new machine 9706/11 May/June 2014

12 June purchased a new machine. She depreciated it at a rate of 40% a year on the reducing balance basis. After two years its net book value was $3600. What was the purchase price? A $8400 B $10 000 C $14 400 D $22 500

1 marks

Answer: B

This question in 9706/11 May/June 2014

Q73 · The following information relates to the motor vehicles of a business 9706/11 May/June 2014

14 The following information relates to the motor vehicles of a business. 1 January 2013 31 December 2013 $ $ net book value 398 000 480 000 During 2013 the following occurred. 1 Additional motor vehicles costing $195 000 were purchased. 2 A motor vehicle (original cost $80 000) was sold for $24 000 at a profit of $2000. What was the depreciation charge for 2013? A $87 000 B $89 000 C $91 000 D $113 000

1 marks

Answer: C

This question in 9706/11 May/June 2014

Q74 · A non-current asset is depreciated due to passage of time 9706/12 May/June 2014

5 A non-current asset is depreciated due to passage of time. Which type of non-current asset is it? A a computer which has become out of date B a lease with a fixed life in terms of years C a machine which is subject to rust and breakdown D a mine which loses value as coal is extracted

1 marks

Answer: B

This question in 9706/12 May/June 2014

Q75 · On 1 June 2011, a company purchases machinery for $18 000 9706/12 May/June 2014

6 On 1 June 2011, a company purchases machinery for $18 000. The company depreciates machinery at 20% per annum using the reducing balance method. The machinery was sold on 1 June 2013 for $9400. What is the profit / loss on the disposal of the machinery? A loss $1400 B loss $2120 C profit $1400 D profit $2120

1 marks

Answer: B

This question in 9706/12 May/June 2014

Q76 · A company’s non-current asset turnover figure rises from 3.4 times in Year 1 to 4 times… 9706/12 May/June 2014

25 A company’s non-current asset turnover figure rises from 3.4 times in Year 1 to 4 times in Year 2. Sales revenue has been constant. What explains the change? A The cost of repairs to non-current assets had decreased. B The cost of repairs to non-current assets had increased. C The depreciation charge for the year was higher than the cost of non-current assets purchased. D The depreciation charge for the year was lower than the cost of non-current assets purchased.

1 marks

Answer: C

This question in 9706/12 May/June 2014

Q77 · Sybil owns a vehicle which on 1 August 2014 will be shown at a cost of $10 000 with… 9706/12 May/June 2014

30 Sybil owns a vehicle which on 1 August 2014 will be shown at a cost of $10 000 with accumulated depreciation of $6000. On that date she expects to trade it in against a new vehicle with a cost of $15 000, receiving a trade-in allowance of $3500. Which figure will appear in Sybil’s cash budget for August 2014? A $5000 B $11 000 C $11 500 D $15 000

1 marks

Answer: C

This question in 9706/12 May/June 2014

Q78 · An item of machinery cost $60 000 9706/13 May/June 2014

1 An item of machinery cost $60 000. The machinery was later sold for $8000 and the loss on disposal was $3000. What was the accumulated depreciation on the machinery on disposal? A $49 000 B $52 000 C $55 000 D $65 000

1 marks

Answer: A

This question in 9706/13 May/June 2014

Q79 · A motor vehicle costing $8000 is depreciated by 25% per annum using the reducing balance… 9706/13 May/June 2014

11 A motor vehicle costing $8000 is depreciated by 25% per annum using the reducing balance method. After depreciating for two years it was sold for $4000. What is the loss on disposal? A $500 B $2000 C $4000 D $5000

1 marks

Answer: A

This question in 9706/13 May/June 2014

Q80 · Daphne buys a non-current asset for $10 000 9706/13 May/June 2014

18 Daphne buys a non-current asset for $10 000. It has an estimated life of two years and a scrap value of $2000. She is considering whether to depreciate it using the straight line method or to use the reducing balance method at a rate of 60% per annum. Which statements are correct? 1 The profit for the year in Year 1 is higher if the reducing balance method is chosen. 2 The profit for the year in Year 1 is higher if the straight line method is chosen. 3 The profit on disposal at the end of Year 2 is higher if the reducing balance method is chosen. 4 The profit on disposal at the end of Year 2 is higher if the straight line method is chosen. A 1 and 3 B 1 and 4 C 2 and 3 D 2 and 4

1 marks

Answer: C

This question in 9706/13 May/June 2014

Q81 · A business purchases a new van 9706/11 Oct/Nov 2014

2 A business purchases a new van. The table shows the purchase invoice details. $ purchase price 13 000 delivery charge 500 sign writing 200 road tax 200 tank of fuel 50 How much should be debited to the motor van account? A $13 500 B $13 700 C $13 900 D $13 950

1 marks

Answer: B

This question in 9706/11 Oct/Nov 2014

Q82 · The following information relates to non-current assets 9706/11 Oct/Nov 2014

5 The following information relates to non-current assets. $ net book value at 1 January 2013 20 000 net book value at 31 December 2013 18 000 receipts from disposals 3 500 assets bought 9 700 loss on sale 650 What is the depreciation charge for the year? A $3550 B $4200 C $7550 D $8200

1 marks

Answer: C

This question in 9706/11 Oct/Nov 2014

Q83 · The following is an extract from the statement of financial position for a company at 31… 9706/11 Oct/Nov 2014

16 The following is an extract from the statement of financial position for a company at 31 December 2012. cost depreciation net book value $ $ $ non-current assets 250 000 95 000 155 000 The assets have a residual scrap value of $12 500. Depreciation policy is provided using the reducing balance method at a rate of 25% per annum. What is the depreciation charge for the year ended 31 December 2013? A $35 625 B $38 750 C $59 375 D $62 500

1 marks

Answer: B

This question in 9706/11 Oct/Nov 2014

Q84 · The non-current assets of a business are shown in the table 9706/12 Oct/Nov 2014

2 The non-current assets of a business are shown in the table. end of year start of year $ $ cost 360 000 300 000 accumulated depreciation 120 000 75 000 net book value 240 000 225 000 During the year, non-current assets costing $110 000 were bought and non-current assets with a net book value of $20 000 were sold. What was the depreciation charge for the year? A $35 000 B $45 000 C $50 000 D $75 000

1 marks

Answer: D

This question in 9706/12 Oct/Nov 2014

Q85 · What is the purpose of providing for depreciation? 9706/12 Oct/Nov 2014

10 What is the purpose of providing for depreciation? A to apply the matching principle B to calculate the true value of non-current assets C to ensure that money is available for repair of non-current assets D to provide cash in the business for replacement of non-current assets

1 marks

Answer: A

This question in 9706/12 Oct/Nov 2014

Q86 · On 1 October 2011 a company purchased machinery for $26 000 9706/13 Oct/Nov 2014

3 On 1 October 2011 a company purchased machinery for $26 000. It was depreciated at a rate of 20% per annum using the reducing balance method. On 30 September 2013 the machinery was sold for $12 000. What is the profit or loss on disposal? A $3600 loss B $3600 profit C $4640 loss D $4640 profit

1 marks

Answer: C

This question in 9706/13 Oct/Nov 2014

Q87 · A business provides the following information 9706/13 Oct/Nov 2014

6 A business provides the following information. $ cheque paid in 2013 for equipment bought in 2012 15 000 equipment purchased on credit in 2013 42 000 net book value of equipment at 1 January 2013 83 000 net book value of equipment at 31 December 2013 67 000 What was the depreciation charge in the income statement for the year ended 31 December 2013? A $16 000 B $31 000 C $43 000 D $58 000

1 marks

Answer: D

This question in 9706/13 Oct/Nov 2014

Q88 · A business depreciates its non-current assets at 20% using the straight-line method 9706/12 May/June 2015

6 A business depreciates its non-current assets at 20% using the straight-line method. Depreciation is calculated on a time basis in the year of acquisition and disposal. $ non-current assets, at cost, 31 December 2013 200 000 purchase of machinery 1 January 2014 50 000 disposal of machinery 30 September 2014 40 000 non-current assets, at cost, 31 December 2014 210 000 What is the depreciation charge for non-current assets for the year ended 31 December 2014? A $42 000 B $48 000 C $50 000 D $52 000

1 marks

Answer: B

This question in 9706/12 May/June 2015

Q89 · Which item should be treated as capital expenditure? 9706/13 May/June 2015

1 Which item should be treated as capital expenditure? A the cost of a printer for an existing computer system B repair costs to a car which are not covered by insurance C rent paid on a factory, whilst the company negotiated the purchase of the factory D the replacement of a wooden fence with a new fence

1 marks

Answer: A

This question in 9706/13 May/June 2015

Q90 · A trader depreciates fixtures and fittings at the rate of 10% a year on cost 9706/13 May/June 2015

2 A trader depreciates fixtures and fittings at the rate of 10% a year on cost. On 1 January 2014 a purchase of new fixtures and fittings, $5000, was posted to the advertising account in error. What was the effect of this error on the trader’s capital account on 31 December 2014? A overstated $4500 B overstated $5000 C understated $4500 D understated $5000

1 marks

Answer: C

This question in 9706/13 May/June 2015

Q91 · Non-current assets of a company were as follows 9706/13 May/June 2015

3 Non-current assets of a company were as follows. start of year end of year $ $ at cost 460 000 505 000 accumulated depreciation 215 000 237 000 net book value 245 000 268 000 During the year non-current assets costing $92 000 were purchased and non-current assets with a net book value of $16 000 were sold. What was the depreciation charge for the year? A $22 000 B $23 000 C $53 000 D $69 000

1 marks

Answer: C

This question in 9706/13 May/June 2015

Q92 · A business buys a non-current asset and decides to apply the straight-line method of… 9706/13 May/June 2015

12 A business buys a non-current asset and decides to apply the straight-line method of depreciation. The accountant forgets to include an estimate of scrap value in the calculation. Which statements are correct? 1 The annual depreciation charge is too high. 2 The annual depreciation charge is too low. 3 There is likely to be a loss on disposal in the future. 4 There is likely to be a profit on disposal in the future. A 1 and 3 B 1 and 4 C 2 and 3 D 2 and 4

1 marks

Answer: B

This question in 9706/13 May/June 2015

Q93 · A manufacturing company uses the reducing balance method to calculate depreciation 9706/13 May/June 2015

26 A manufacturing company uses the reducing balance method to calculate depreciation. What describes the depreciation expense? A fixed cost B semi-variable cost C stepped cost D variable cost

1 marks

Answer: A

This question in 9706/13 May/June 2015

Q94 · Motor vehicles purchased for $530 000 at the start of the year have been incorrectly… 9706/11 Oct/Nov 2015

14 Motor vehicles purchased for $530 000 at the start of the year have been incorrectly depreciated for the whole year at 10% instead of 25%. Ledger balances after the entries have been posted: $ motor vehicles at cost 530 000 provision for depreciation 53 000 Which entries will correct the error? account to be debited $ account to be credited $ A income statement 79 500 provision for depreciation 79 500 of motor vehicles B income statement 132 500 provision for depreciation 132 500 of motor vehicles C provision for depreciation 79 500 income statement 79 500 of motor vehicles D provision for depreciation 132 500 income statement 132 500 of motor vehicles

1 marks

Answer: A

This question in 9706/11 Oct/Nov 2015

Q95 · An asset with accumulated depreciation of $72 400 is sold for $46 500 9706/11 Oct/Nov 2015

23 An asset with accumulated depreciation of $72 400 is sold for $46 500. There is a loss on disposal of $23 000. What was the cost of the asset? A $48 900 B $95 900 C $118 900 D $141 900

1 marks

Answer: D

This question in 9706/11 Oct/Nov 2015

Q96 · An item of revenue expenditure is wrongly treated as capital expenditure 9706/12 Oct/Nov 2015

4 An item of revenue expenditure is wrongly treated as capital expenditure. What is the effect of this error? non-current profit for the assets year A overstated overstated B overstated understated C understated overstated D understated understated

1 marks

Answer: A

This question in 9706/12 Oct/Nov 2015

Q97 · A trader prepares a disposal account 9706/12 Oct/Nov 2015

5 A trader prepares a disposal account. On which sides do the cost of the asset and sale proceeds appear? cost of the asset sale proceeds A credit credit B credit debit C debit credit D debit debit

1 marks

Answer: C

This question in 9706/12 Oct/Nov 2015

Q98 · Land and buildings are shown in the books of account at a cost price of $200 000 with… 9706/12 Oct/Nov 2015

7 Land and buildings are shown in the books of account at a cost price of $200 000 with accumulated depreciation of $40 000. The property is revalued at $340 000. Which entries record this transaction? debit credit account $ $ A land and buildings 140 000 income statement 140 000 B land and buildings 140 000 provision for depreciation 40 000 income statement 180 000 C land and buildings 140 000 revaluation reserve 140 000 D land and buildings 140 000 provision for depreciation 40 000 revaluation reserve 180 000

1 marks

Answer: D

This question in 9706/12 Oct/Nov 2015

Q99 · Which cost should be treated as revenue expenditure? 9706/12 Oct/Nov 2015

9 Which cost should be treated as revenue expenditure? A installing a new sound system in a car B purchase of a trailer for a car C replacing a damaged engine of a car D replacing an old car with a new one

1 marks

Answer: C

This question in 9706/12 Oct/Nov 2015

Q100 · A business depreciates its motor vehicles over four years using the straight-line method 9706/12 Oct/Nov 2015

13 A business depreciates its motor vehicles over four years using the straight-line method. A full year’s depreciation is charged in the year of purchase, but none in the year of sale. A vehicle purchased on 1 July 2011 for $18 000 had an estimated residual value of $4000. The vehicle was sold for $5000 on 31 December 2014. Which entry appeared in the income statement for the year ended 31 December 2014? A $1000 loss B $2500 loss C $2500 profit D $5000 profit

1 marks

Answer: B

This question in 9706/12 Oct/Nov 2015

Q101 · A depreciated non-current asset is revalued upwards 9706/13 Oct/Nov 2015

5 A depreciated non-current asset is revalued upwards. What is the effect of this on the statement of financial position? A Non-current assets increase, equity decreases. B Non-current assets increase, equity increases. C Non-current assets increase, retained earnings decrease. D Non-current assets increase, retained earnings increase.

1 marks

Answer: B

This question in 9706/13 Oct/Nov 2015

Q102 · The following information is available in respect of a non-current asset 9706/13 Oct/Nov 2015

6 The following information is available in respect of a non-current asset. $ purchase price 160 000 accumulated depreciation at the date of disposal 100 000 sale proceeds 65 000 market value at the date of disposal 68 000 What is the profit or loss on disposal? A $5000 profit B $8000 profit C $92 000 loss D $95 000 loss

1 marks

Answer: A

This question in 9706/13 Oct/Nov 2015

Question 103 9706/13 Oct/Nov 2015

16 What is depreciation? A a means of allocating the cost of a non-current asset over its useful life B a measure of the decrease in market value of a non-current asset C an outflow of cash from the use of a non-current asset D the expense spent on the non-current asset

1 marks

Answer: A

This question in 9706/13 Oct/Nov 2015

Q104 · Why is depreciation provided on non-current assets? 9706/12 Feb/March 2016

2 Why is depreciation provided on non-current assets? A so that the cost is allocated to periods that benefit from them B so that the entity concept is applied C so that there is enough cash in the business to replace them D so that they are shown at market value

1 marks

Answer: A

This question in 9706/12 Feb/March 2016

Q105 · The following information relates to the disposal of a non-current asset 9706/12 Feb/March 2016

3 The following information relates to the disposal of a non-current asset. $ profit on disposal 5 200 cost of non-current asset sold 14 400 sales proceeds 6 800 What was the accumulated depreciation on the non-current asset sold? A $1600 B $2400 C $7600 D $12 800

1 marks

Answer: D

This question in 9706/12 Feb/March 2016

Q106 · The table shows extracts from the statements of financial position of a business 9706/11 May/June 2016

2 The table shows extracts from the statements of financial position of a business. 2014 2015 $ $ non-current assets (at cost) 190 000 245 000 less accumulated depreciation 75 000 90 000 net book value 115 000 155 000 Other information for the financial year 2015 is as follows. $ depreciation charged 40 000 new non-current assets purchased (at cost) 105 000 loss on sale of non-current assets 10 000 Which amount was received from the sale of the non-current assets? A $15 000 B $25 000 C $35 000 D $50 000

1 marks

Answer: A

This question in 9706/11 May/June 2016

Q107 · What would be treated as part of the capital cost of the purchase of a building? 9706/11 May/June 2016

3 What would be treated as part of the capital cost of the purchase of a building? 1 cost of purchase 2 insurance of the building 3 installation of air conditioning needed for the machinery in the building A 1 only B 1, 2 and 3 C 1 and 3 only D 2 and 3 only

1 marks

Answer: C

This question in 9706/11 May/June 2016

Q108 · A company’s financial year ends on 31 December 9706/12 May/June 2016

2 A company’s financial year ends on 31 December. On 1 April 2015, the following payments relating to a new machine were made. $ purchase cost 50 000 installation 10 000 Machinery is depreciated at 20% on cost per annum, calculated from the date of purchase. What was the depreciation of the new machine for the year ended 31 December 2015? A $7500 B $9000 C $10 000 D $12 000

1 marks

Answer: B

This question in 9706/12 May/June 2016

Q109 · A business purchased a motor vehicle on 1 January 2012 for $24 000 9706/12 May/June 2016

3 A business purchased a motor vehicle on 1 January 2012 for $24 000. The estimated useful life of the motor vehicle was four years and the estimated residual value at the end of four years was $8000. 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? A $1875 B $4000 C $5250 D $8000

1 marks

Answer: A

This question in 9706/12 May/June 2016

Q110 · A building was purchased for $500 000 9706/12 May/June 2016

4 A building was purchased for $500 000. The following costs were also incurred. $ adapting the new building 50 000 legal fees for the building purchase 5 000 cleaning the building 4 000 salary of building manager 20 000 What was the capital cost of the building? A $550 000 B $555 000 C $559 000 D $579 000

1 marks

Answer: B

This question in 9706/12 May/June 2016

Q111 · The table shows extracts from the statements of financial position of a business 9706/13 May/June 2016

2 The table shows extracts from the statements of financial position of a business. 2014 2015 $ $ non-current assets (at cost) 190 000 245 000 less accumulated depreciation 75 000 90 000 net book value 115 000 155 000 Other information for the financial year 2015 is as follows. $ depreciation charged 40 000 new non-current assets purchased (at cost) 105 000 loss on sale of non-current assets 10 000 Which amount was received from the sale of the non-current assets? A $15 000 B $25 000 C $35 000 D $50 000

1 marks

Answer: A

This question in 9706/13 May/June 2016

Q112 · What would be treated as part of the capital cost of the purchase of a building? 9706/13 May/June 2016

3 What would be treated as part of the capital cost of the purchase of a building? 1 cost of purchase 2 insurance of the building 3 installation of air conditioning needed for the machinery in the building A 1 only B 1, 2 and 3 C 1 and 3 only D 2 and 3 only

1 marks

Answer: C

This question in 9706/13 May/June 2016

Q113 · A company purchased a lorry for $50 000 on 1 January 2015 9706/11 Oct/Nov 2016

2 A company purchased a lorry for $50 000 on 1 January 2015. It has an estimated residual value of $10 000 and a four-year life. The company charges depreciation monthly on a straight-line basis. What will the charge for depreciation be for the year to 30 June 2015? A $5000 B $6250 C $10 000 D $12 500

1 marks

Answer: A

This question in 9706/11 Oct/Nov 2016

Q114 · The opening net book value of motor vehicles was $150 000 9706/11 Oct/Nov 2016

3 The opening net book value of motor vehicles was $150 000. During the year a motor vehicle was sold for $26 000. There was a profit on disposal of $2000. Depreciation is calculated at 10% on the opening net book value. The closing net book value was $145 000. What was the cost of motor vehicles purchased during the year? A $33 500 B $34 000 C $35 500 D $36 000

1 marks

Answer: B

This question in 9706/11 Oct/Nov 2016

Q115 · A disposal account is used to record the sale of a non-current asset 9706/12 Oct/Nov 2016

2 A disposal account is used to record the sale of a non-current asset. Which transactions are recorded on the credit side of the disposal account? A cost, loss on disposal and sale proceeds B cost, profit on disposal and sale proceeds C depreciation, loss on disposal and sale proceeds D depreciation, profit on disposal and sale proceeds

1 marks

Answer: C

This question in 9706/12 Oct/Nov 2016

Q116 · The following information was available for the disposal of a machine 9706/12 Oct/Nov 2016

3 The following information was available for the disposal of a machine. $ accumulated depreciation 45 000 profit on disposal 8 100 sale proceeds 75 600 What was the original cost of the machine? A $22 500 B $38 700 C $112 500 D $128 700

1 marks

Answer: C

This question in 9706/12 Oct/Nov 2016

Q117 · A printing company installed a large printing press 9706/12 Oct/Nov 2016

4 A printing company installed a large printing press. Which costs are capital expenditure in the first year of its operation? 1 installation of the press 2 depreciation of the press 3 repairs to the press 4 upgrades to the press A 1 and 2 B 1 and 4 C 2 and 3 D 3 and 4

1 marks

Answer: B

This question in 9706/12 Oct/Nov 2016

Q118 · A vehicle was part exchanged for a new vehicle 9706/13 Oct/Nov 2016

3 A vehicle was part exchanged for a new vehicle. Which entries record the part exchange? account debited account credited A cash motor vehicles at cost B disposal motor vehicles at cost C motor vehicles at cost cash D motor vehicles at cost disposal

1 marks

Answer: D

This question in 9706/13 Oct/Nov 2016

Q119 · Why are non-current assets depreciated? 9706/13 Oct/Nov 2016

5 Why are non-current assets depreciated? A to ensure that funds exist for asset replacement B to show a reduction in the market values of non-current assets C to show non-current assets at replacement cost in the statement of financial position D to spread the cost of non-current assets over their useful lives

1 marks

Answer: D

This question in 9706/13 Oct/Nov 2016

Q120 · Which item should be treated as capital expenditure? 9706/12 Feb/March 2017

2 Which item should be treated as capital expenditure? A cost of carriage on the purchase of a non-current asset B cost of replacement of part of a non-current asset C depreciation of a non-current asset D repairs to a non-current asset

1 marks

Answer: A

This question in 9706/12 Feb/March 2017

Q121 · During the year ended 31 December 2012 a business purchased a vehicle for $23 500 9706/12 Feb/March 2017

3 During the year ended 31 December 2012 a business purchased a vehicle for $23 500. On 30 September 2015 it was sold for $3500. Depreciation was charged at 20% per annum using the straight line method. A full year’s depreciation was charged in the year of purchase and the year of disposal. What was the profit or loss on disposal of the vehicle? A $1200 loss B $1200 profit C $5900 loss D $5900 profit

1 marks

Answer: A

This question in 9706/12 Feb/March 2017

Q122 · A partnership revalues its non-current assets upwards 9706/12 Feb/March 2017

14 A partnership revalues its non-current assets upwards. What are the ledger entries to record this? account to debit account to credit A non-current assets bank B non-current assets partners’ capital accounts C non-current assets partners’ current accounts D non-current assets revaluation reserve

1 marks

Answer: B

This question in 9706/12 Feb/March 2017

Q123 · Why does a business charge depreciation on its non-current assets? 9706/11 May/June 2017

2 Why does a business charge depreciation on its non-current assets? A to retain profits for the replacement of worn out assets B to show the value of the assets in the statement of financial position C to show when an asset needs replacing D to spread the cost of the assets over their useful lives

1 marks

Answer: D

This question in 9706/11 May/June 2017

Q124 · How is depreciation calculated using the straight-line method? 9706/11 May/June 2017

3 How is depreciation calculated using the straight-line method? A as a fixed percentage of the asset’s net book value B as a fixed percentage of the asset’s original cost C as a variable percentage of the asset’s net book value D as a variable percentage of the asset’s original cost

1 marks

Answer: B

This question in 9706/11 May/June 2017

Q125 · A business depreciates its machinery at 10% per annum using the straight-line method on a… 9706/11 May/June 2017

4 A business depreciates its machinery at 10% per annum using the straight-line method on a month-by-month basis. The business’s financial year end is 30 June. Machinery which had cost $6600 on 1 April 2014 was sold on 30 November 2015. The profit on sale was $350. What were the sale proceeds? A $5150 B $5425 C $5850 D $6125

1 marks

Answer: C

This question in 9706/11 May/June 2017

Q126 · The table shows information relating to the non-current assets of a business 9706/11 May/June 2017

5 The table shows information relating to the non-current assets of a business. $ net book value at beginning of year 28 000 net book value at end of year 25 000 depreciation charge for the year 4 000 disposals at net book value 9 000 What is the cost of the additions in the year? A $2000 B $6000 C $10 000 D $16 000

1 marks

Answer: C

This question in 9706/11 May/June 2017

Q127 · Amitav purchased a van costing $20 000 9706/12 May/June 2017

3 Amitav purchased a van costing $20 000. He provided an old van with a net book value of $8000 in part exchange. There was a profit on disposal of $1500. What was the cash outflow arising from the purchase? A $9500 B $10 500 C $12 000 D $13 500

1 marks

Answer: B

This question in 9706/12 May/June 2017

Q128 · The net book value of a company’s non-current assets was as follows 9706/12 May/June 2017

4 The net book value of a company’s non-current assets was as follows. $ at 1 January 2016 100 000 at 31 December 2016 80 000 During 2016 assets were sold for $20 000, realising a profit on disposal of $5000. Depreciation charged for 2016 was $8000. What was the expenditure on new assets in 2016? A $3000 B $5000 C $8000 D $15 000

1 marks

Answer: A

This question in 9706/12 May/June 2017

Q129 · Which statement describes the treatment of purchased goodwill for a limited company? 9706/12 May/June 2017

15 Which statement describes the treatment of purchased goodwill for a limited company? A a tangible non-current asset that can be amortised B a tangible non-current asset that can be depreciated C an intangible non-current asset that can be amortised D an intangible non-current asset that can be depreciated

1 marks

Answer: C

This question in 9706/12 May/June 2017

Q130 · Which statements explain why depreciation might be charged on a non-current asset? 9706/13 May/June 2017

3 Which statements explain why depreciation might be charged on a non-current asset? 1 An asset could be subject to obsolescence. 2 The actual future disposal proceeds could differ from the estimated residual scrap value. 3 The estimated future replacement cost could differ from the original purchase price. A 1 and 2 B 1 only C 1 and 3 D 2 and 3

1 marks

Answer: A

This question in 9706/13 May/June 2017

Q131 · A trader bought a machine on 1 January 2015 9706/13 May/June 2017

4 A trader bought a machine on 1 January 2015. He depreciated it at the rate of 10% per annum using the straight-line method, and he sold it on 1 January 2017 for $4000. The profit on disposal was $200. How much had the machine cost on 1 January 2015? A $4560 B $4750 C $5040 D $5250

1 marks

Answer: B

This question in 9706/13 May/June 2017

Q132 · The following information relates to non-current assets 9706/13 May/June 2017

5 The following information relates to non-current assets. $ net book value at 1 January 2016 20 000 net book value at 31 December 2016 18 000 receipts from disposals 3 500 assets bought 9 700 loss on disposal 650 What is the depreciation charge for the year? A $3550 B $4200 C $7550 D $8200

1 marks

Answer: C

This question in 9706/13 May/June 2017

Q133 · A business purchased a shop and incurred the following costs 9706/11 Oct/Nov 2017

2 A business purchased a shop and incurred the following costs. $ purchase price of the shop 680 000 legal fees incurred in the purchase of the shop 7 200 cost of initial inventory 12 500 cost of installing air conditioning 47 300 Which amount was capital expenditure? A $680 000 B $687 200 C $734 500 D $747 000

1 marks

Answer: C

This question in 9706/11 Oct/Nov 2017

Q134 · Why is a non-current asset depreciated? 9706/11 Oct/Nov 2017

3 Why is a non-current asset depreciated? A to allocate its cost over its useful life B to measure its decline in market value C to measure its physical deterioration D to recognise the cash outflow from the use of it

1 marks

Answer: A

This question in 9706/11 Oct/Nov 2017

Q135 · The following information is available in respect of a trader’s non-current assets 9706/11 Oct/Nov 2017

4 The following information is available in respect of a trader’s non-current assets. $ accumulated depreciation at 31 May 2015 40 000 depreciation charge for the year ended 31 May 2016 9 000 accumulated depreciation at 31 May 2016 46 000 During the year ended 31 May 2016 a non-current asset which had cost $10 000 was sold. There was a loss on disposal of $1200. What were the sale proceeds of the non-current asset sold? A $5800 B $7000 C $8200 D $8800

1 marks

Answer: A

This question in 9706/11 Oct/Nov 2017

Q136 · The following information relating to motor vehicles for a business is available 9706/11 Oct/Nov 2017

20 The following information relating to motor vehicles for a business is available. All motor vehicles were purchased 10 years ago at a total cost of $500 000. They currently have a total net book value of $100 000. There has been no sale of motor vehicles during the period. How has depreciation been calculated on these motor vehicles? A 8% per annum using the reducing balance method B 8% per annum using the straight-line method C 20% per annum using the reducing balance method D 20% per annum using the straight-line method

1 marks

Answer: B

This question in 9706/11 Oct/Nov 2017

Q137 · Which item is classed as revenue expenditure? 9706/12 Oct/Nov 2017

1 Which item is classed as revenue expenditure? A installation costs of machinery B legal fees on the purchase of premises C number plates on a new motor vehicle D redecorating office premises

1 marks

Answer: D

This question in 9706/12 Oct/Nov 2017

Q138 · What is the purpose of depreciation? 9706/12 Oct/Nov 2017

2 What is the purpose of depreciation? A to allocate the cost of the assets over their lives B to improve liquidity ratios of the business C to provide sufficient funds to replace the assets D to show the assets at their market values

1 marks

Answer: A

This question in 9706/12 Oct/Nov 2017

Q139 · A company’s year end is 30 April 9706/12 Oct/Nov 2017

3 A company’s year end is 30 April. It purchases a factory in May 2014 at a cost of $200 000. The factory will be depreciated over 20 years. A full year’s depreciation is charged in the year of purchase. In May 2017 the factory is revalued at $300 000. How much should be included in the revaluation reserve account? A $100 000 B $120 000 C $130 000 D $140 000

1 marks

Answer: C

This question in 9706/12 Oct/Nov 2017

Q140 · A business has a year end of 31 December 9706/12 Oct/Nov 2017

4 A business has a year end of 31 December. It purchased a non-current asset on 1 January 2014 for $100 000. It was depreciated using the reducing balance method at 20% per annum. It was sold for $40 000 on 1 January 2016. What was the loss on disposal? A $20 000 B $24 000 C $40 000 D $60 000

1 marks

Answer: B

This question in 9706/12 Oct/Nov 2017

Q141 · The accounting year for a business ends on 31 December 9706/13 Oct/Nov 2017

2 The accounting year for a business ends on 31 December. On September 2013 it had purchased a machine for $20 000. The machine was sold on 30 November 2016 for $7500. The company depreciated the machinery at 15% using the straight-line method. It charged a full year’s depreciation in the year of purchase and none in the year of sale. What is the profit or loss on disposal? A $2750 loss B $2750 profit C $3500 loss D $3500 profit

1 marks

Answer: C

This question in 9706/13 Oct/Nov 2017

Q142 · The table shows how a property was recorded in the statement of financial position 9706/13 Oct/Nov 2017

3 The table shows how a property was recorded in the statement of financial position. $ land and buildings 100 000 accumulated depreciation (40 000) net book value 60 000 The land and buildings were later revalued to $150 000. What is the journal entry to record the revaluation? Dr Cr $ $ A income statement 50 000 land and buildings 50 000 B land and buildings 50 000 income statement 50 000 C land and buildings 50 000 provision for depreciation 40 000 revaluation reserve 90 000 D revaluation reserve 90 000 land and buildings 50 000 provision for depreciation 40 000

1 marks

Answer: C

This question in 9706/13 Oct/Nov 2017

Q143 · A company purchased a machine for $50 000 9706/13 Oct/Nov 2017

4 A company purchased a machine for $50 000. It had an estimated resale value of $5000 at the end of five years. The machine was sold for $6000 at the end of its five year life. Which statement is correct? A Depreciation charges over the five year period have reduced profits by a total of $50 000. B The annual depreciation charge was overstated by $200. C The company profits in years one to four need to be adjusted. D The depreciation method used by the company has no effect on profits.

1 marks

Answer: B

This question in 9706/13 Oct/Nov 2017

Q144 · Which accounting concepts apply to depreciation? 9706/12 Feb/March 2018

2 Which accounting concepts apply to depreciation? 1 consistency 2 matching 3 money measurement 4 prudence A 1, 2 and 4 B 1 and 2 only C 2 and 4 only D 3 and 4

1 marks

Answer: A

This question in 9706/12 Feb/March 2018

Q145 · A motor vehicle was purchased for $12 000 on 1 January 2015 9706/12 Feb/March 2018

3 A motor vehicle was purchased for $12 000 on 1 January 2015. Its estimated residual value was $7000 and expected life 5 years. Depreciation was calculated on a month-by-month basis using the straight-line method. It was sold on 30 June 2017 and there was a loss on disposal of $2560. What were the sale proceeds? A $3440 B $4352 C $6440 D $6940

1 marks

Answer: D

This question in 9706/12 Feb/March 2018

Q146 · The following information relates to a motor vehicle part-exchanged for a new vehicle in… 9706/12 Feb/March 2018

4 The following information relates to a motor vehicle part-exchanged for a new vehicle in the year. $ cost of old vehicle 20 000 accumulated depreciation at the date of sale 8 000 profit on disposal 3 000 cost of new vehicle 25 000 The balance payable for the new vehicle was paid from the business bank account. How much was the payment from the bank account? A $9000 B $10 000 C $15 000 D $20 000

1 marks

Answer: B

This question in 9706/12 Feb/March 2018

Q147 · A company purchased a new machine costing $110 000 with an estimated life of 10 years 9706/11 May/June 2018

2 A company purchased a new machine costing $110 000 with an estimated life of 10 years. The machine was considered to have a residual value of $10 000. The company uses the straight-line method of depreciation and provides depreciation in full in the year of purchase and sale. The machine was sold for $20 000 at the end of its life. Which statement is correct? A The annual depreciation charges have been overstated by $1000. B The choice of the depreciation method has no effect on the annual profits of the company. C The company can replace the machine from accumulated depreciation charges over its life. D The effect of depreciation had been to reduce profits by a total of $110 000 over the life of the asset.

1 marks

Answer: A

This question in 9706/11 May/June 2018

Q148 · Adam’s financial year ends on 31 December 2017 9706/12 May/June 2018

2 Adam’s financial year ends on 31 December 2017. On 1 January 2017 the net book value of machinery was $20 000. On 30 June 2017 he purchased a new machine for $6000. He paid 50% of the cost in cash and the balance by part exchange of an old machine, which had a net book value of $2500 on that date. He depreciates his machinery by 20% per annum on the net book value calculated on a time basis. What is the net book value of the machinery shown in the statement of financial position on 31 December 2017? A $18 400 B $18 800 C $19 150 D $20 800

1 marks

Answer: C

This question in 9706/12 May/June 2018

Q149 · A business has an accounting year-end of 31 March 9706/12 May/June 2018

3 A business has an accounting year-end of 31 March. It purchased a car on 1 April 2014 for $15 000. The car was sold on 30 September 2017 for $5000. Depreciation is charged at 20% per annum. A full year’s depreciation is charged in the year of purchase. No depreciation is charged in the year of sale. What was the profit or loss on disposal? A loss of $500 B loss of $1000 C profit of $500 D profit of $1000

1 marks

Answer: B

This question in 9706/12 May/June 2018

Q150 · Why is depreciation charged on non-current assets? 9706/13 May/June 2018

2 Why is depreciation charged on non-current assets? A to be able to calculate a profit or loss on disposal B to calculate a residual scrap value C to reflect future replacement cost D to spread its cost over its useful life

1 marks

Answer: D

This question in 9706/13 May/June 2018

Q151 · The net book values of a company’s non-current assets are as follows 9706/13 May/June 2018

3 The net book values of a company’s non-current assets are as follows. $ at 1 January 2017 20 000 at 31 December 2017 15 000 During 2017 non-current assets, $7000, were purchased. Non-current assets were sold realising a profit of $1000. The depreciation charge for 2017 was $8000. What were the disposal proceeds of the assets sold? A $3000 B $4000 C $5000 D $8000

1 marks

Answer: C

This question in 9706/13 May/June 2018

Q152 · Which costs may be capitalised as land and buildings? 9706/13 May/June 2018

4 Which costs may be capitalised as land and buildings? 1 construction cost of an extension 2 insurance premium 3 legal fees on purchase 4 redecoration costs A 1 and 2 B 1 and 3 C 2 and 4 D 3 and 4

1 marks

Answer: B

This question in 9706/13 May/June 2018

Q153 · Why is an expense for depreciation included in the financial statements? 9706/11 Oct/Nov 2018

2 Why is an expense for depreciation included in the financial statements? A to charge the wear and tear on non-current assets against profits B to make cash available to replace non-current assets C to set cash aside for future repairs of non-current assets D to show the current market values of non-current assets

1 marks

Answer: A

This question in 9706/11 Oct/Nov 2018

Q154 · A company incurred the following expenditures on a motor van 9706/11 Oct/Nov 2018

3 A company incurred the following expenditures on a motor van. $ year 1 purchase of motor van 80 000 year 2 purchase of new tyres 2 000 year 2 purchase of trailer attached to the motor van 10 000 Depreciation to all vehicles is 20% on cost. A full year’s depreciation is charged in the year of purchase. What was the depreciation charge on vehicles for year 2? A $16 000 B $16 400 C $18 000 D $18 400

1 marks

Answer: C

This question in 9706/11 Oct/Nov 2018

Q155 · Which non-current asset is most likely to be depreciated using the revaluation method? 9706/12 Oct/Nov 2018

2 Which non-current asset is most likely to be depreciated using the revaluation method? A loose tools B motor vehicles C office equipment D plant and machinery

1 marks

Answer: A

This question in 9706/12 Oct/Nov 2018

Q156 · A trader purchased a motor vehicle costing $36 000 on 1 July 2016 9706/12 Oct/Nov 2018

3 A trader purchased a motor vehicle costing $36 000 on 1 July 2016. The estimated useful life of the motor vehicle was five years and the estimated residual value was $6000. Depreciation is provided on a month-by-month basis using the straight-line method. The motor vehicle was sold on 31 March 2018 for $22 500. What was the profit or loss on disposal of the motor vehicle? A $900 loss B $900 profit C $3000 loss D $3000 profit

1 marks

Answer: C

This question in 9706/12 Oct/Nov 2018

Q157 · The following is an extract from the statement of financial position for a company at 31… 9706/12 Oct/Nov 2018

4 The following is an extract from the statement of financial position for a company at 31 December 2016. accumulated cost net book value depreciation $ $ $ non-current assets 250 000 95 000 155 000 The assets have a residual scrap value of $12 500. The company’s policy is to provide depreciation using the reducing balance method at a rate of 25% per annum. What was the depreciation charge for the year ended 31 December 2017? A $35 625 B $38 750 C $59 375 D $62 500

1 marks

Answer: B

This question in 9706/12 Oct/Nov 2018

Q158 · Why does a business charge depreciation? 9706/13 Oct/Nov 2018

2 Why does a business charge depreciation? 1 to be able to replace an asset at the end of its useful life 2 to charge the cost of an asset to each period that benefits from its use 3 to treat each asset according to the concept of consistency A 1 and 2 B 2 only C 2 and 3 D 3 only

1 marks

Answer: B

This question in 9706/13 Oct/Nov 2018

Q159 · The following information relates to non-current assets 9706/13 Oct/Nov 2018

4 The following information relates to non-current assets. $ net book value at 31 December 2016 42 000 net book value at 31 December 2017 34 000 assets bought 8 700 receipts from assets sold 7 900 depreciation charge for the year 2017 9 500 What was the profit or loss on the disposal of non-current assets sold during the year? A loss $700 B loss $900 C profit $700 D profit $900

1 marks

Answer: C

This question in 9706/13 Oct/Nov 2018

Q160 · During the year a business sells a non-current asset 9706/13 Oct/Nov 2018

5 During the year a business sells a non-current asset. The following information is available. $ original cost 500 accumulated depreciation at date of sale 240 profit on sale 70 What are the proceeds from the sale of the non-current asset? A $170 B $190 C $310 D $330

1 marks

Answer: D

This question in 9706/13 Oct/Nov 2018

Q161 · Why is depreciation provided on non-current assets? 9706/12 Feb/March 2019

2 Why is depreciation provided on non-current assets? A so that the cost is allocated to periods that benefit from them B so that the business entity concept is applied C so that there is enough cash in the business to replace them D so that they are shown at market value

1 marks

Answer: A

This question in 9706/12 Feb/March 2019

Q162 · A company purchased an asset costing $100 000 9706/12 Feb/March 2019

3 A company purchased an asset costing $100 000. It had a life of five years and an estimated residual value of $20 000. The company uses straight-line depreciation. The asset was sold for $5000 at the end of the five-year period. What is the total effect on year five profits from both depreciating and selling the asset? amount of expense $ A 1000 B 15 000 C 16 000 D 31 000

1 marks

Answer: D

This question in 9706/12 Feb/March 2019

Q163 · A business provides the following information 9706/12 Feb/March 2019

4 A business provides the following information. $ cheque paid in 2018 for equipment bought in 2017 15 000 equipment purchased on credit in 2018 42 000 net book value of equipment at 1 January 2018 83 000 net book value of equipment at 31 December 2018 67 000 What was the depreciation charge in the income statement for the year ended 31 December 2018? A $16 000 B $31 000 C $43 000 D $58 000

1 marks

Answer: D

This question in 9706/12 Feb/March 2019

Q164 · Daphne buys a non-current asset for $10 000 9706/12 Feb/March 2019

5 Daphne buys a non-current asset for $10 000. It has an estimated life of two years and a scrap value of $2000. She is considering whether to depreciate it using the straight-line method or to use the reducing balance method at a rate of 60% per annum. Which statements are correct? 1 The profit for the year in Year 1 is higher if the reducing balance method is chosen. 2 The profit for the year in Year 1 is higher if the straight-line method is chosen. 3 The profit on disposal at the end of Year 2 is higher if the reducing balance method is chosen. 4 The profit on disposal at the end of Year 2 is higher if the straight-line method is chosen. A 1 and 3 B 1 and 4 C 2 and 3 D 2 and 4

1 marks

Answer: C

This question in 9706/12 Feb/March 2019

Q165 · Why is depreciation provided on non-current assets? 9706/11 May/June 2019

2 Why is depreciation provided on non-current assets? 1 to ensure funds are available to replace the item 2 to ensure the profits of the business are not overstated 3 to match the cost of the asset with the revenue it earns A 1, 2 and 3 B 1 and 2 only C 1 and 3 only D 2 and 3 only

1 marks

Answer: D

This question in 9706/11 May/June 2019

Q166 · The net book value of motor vehicles of a business was as follows: 31 December 31… 9706/11 May/June 2019

3 The net book value of motor vehicles of a business was as follows: 31 December 31 December 2017 2018 motor vehicles $238 000 $243 000 During the year ended 31 December 2018, a new motor vehicle was purchased for $47 000. A motor vehicle costing $53 000 with accumulated depreciation $31 000 was sold for $7000. What was the depreciation charge for motor vehicles for the year ended 31 December 2018? A $11 000 B $20 000 C $35 000 D $42 000

1 marks

Answer: B

This question in 9706/11 May/June 2019

Q167 · A business with a year-end of 31 December purchased a motor vehicle on 1 January 2015 for… 9706/11 May/June 2019

4 A business with a year-end of 31 December purchased a motor vehicle on 1 January 2015 for $24 000. The estimated useful life of the motor vehicle was four years and the estimated residual value at the end of four years was $8000. 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 2018 for $12 000. What was the profit on the sale of the motor vehicle? A $1875 B $4000 C $5250 D $6000

1 marks

Answer: A

This question in 9706/11 May/June 2019

Q168 · What are causes of depreciation on non-current assets? 9706/12 May/June 2019

2 What are causes of depreciation on non-current assets? 1 change in its cost of repair 2 change in its market value 3 changes in technology A 1 and 2 B 1 only C 2 and 3 D 3 only

1 marks

Answer: D

This question in 9706/12 May/June 2019

Q169 · June purchased a new machine 9706/12 May/June 2019

3 June purchased a new machine. She depreciated it at a rate of 40% per annum using the reducing balance method. After two years its net book value was $3600. What was the purchase price of the machine? A $7056 B $9216 C $10 000 D $22 500

1 marks

Answer: C

This question in 9706/12 May/June 2019

Q170 · The following information relates to the motor vehicles of a business 9706/12 May/June 2019

4 The following information relates to the motor vehicles of a business. 1 January 2018 31 December 2018 $ $ net book value 398 000 480 000 During 2018 the following occurred. 1 Additional motor vehicles costing $195 000 were purchased. 2 A motor vehicle (original cost $80 000) was sold for $24 000 at a profit of $2000. What was the depreciation charge for 2018? A $87 000 B $89 000 C $91 000 D $113 000

1 marks

Answer: C

This question in 9706/12 May/June 2019

Q171 · Why is depreciation provided on a non-current asset? 9706/13 May/June 2019

2 Why is depreciation provided on a non-current asset? 1 to apply the matching concept 2 to ensure the asset is shown at its market value 3 to spread the cost of the asset over its useful life A 1, 2 and 3 B 1 and 2 only C 1 and 3 only D 2 and 3 only

1 marks

Answer: C

This question in 9706/13 May/June 2019

Q172 · The accounting year of a business ends on 31 December 9706/13 May/June 2019

3 The accounting year of a business ends on 31 December. An office building with a useful life of 40 years was purchased on 1 January 2010 for $400 000. It is expected to have no residual value. Depreciation is charged using the straight-line method. The office building was revalued on 1 January 2018 for $480 000. What will be the net book value of the office building at 31 December 2019? A $360 000 B $450 000 C $456 000 D $465 000

1 marks

Answer: B

This question in 9706/13 May/June 2019

Q173 · A new machine is purchased at a price of $75 000 9706/13 May/June 2019

4 A new machine is purchased at a price of $75 000. In addition, delivery and installation cost is $2500. The business depreciates all non-current assets at a rate of 20% per annum using the straight-line method. By how much would depreciation decrease the profit for the year? A $14 500 B $15 000 C $15 500 D $17 500

1 marks

Answer: C

This question in 9706/13 May/June 2019

Q174 · The net book value of motor vehicles at the start of the year was $150 000 9706/11 Oct/Nov 2019

3 The net book value of motor vehicles at the start of the year was $150 000. During the year a motor vehicle was sold for $26 000. There was a profit on disposal of $2000. Depreciation is calculated at 10% on the opening net book value. The net book value at the end of the year was $145 000. What was the cost of motor vehicles purchased during the year? A $33 500 B $34 000 C $35 500 D $36 000

1 marks

Answer: B

This question in 9706/11 Oct/Nov 2019

Q175 · A company’s accounting year end is 30 June 9706/11 Oct/Nov 2019

4 A company’s accounting year end is 30 June. On 1 October 2016 it purchased a machine for $16 000. This was sold for $7000 on 31 March 2019. The company depreciates its machinery at 15% per annum on cost. Depreciation is charged on a month-by-month basis. What was the profit or loss on disposal? A $1800 loss B $1800 profit C $3000 loss D $3000 profit

1 marks

Answer: C

This question in 9706/11 Oct/Nov 2019

Q176 · A business buys a non-current asset and decides to apply the straight-line method of… 9706/12 Oct/Nov 2019

2 A business buys a non-current asset and decides to apply the straight-line method of depreciation. The accountant forgets to include an estimate of scrap value in the calculation. Which statements are correct? 1 The annual depreciation charge is too high. 2 The annual depreciation charge is too low. 3 There is likely to be a loss on disposal in the future. 4 There is likely to be a profit on disposal in the future. A 1 and 3 B 1 and 4 C 2 and 3 D 2 and 4

1 marks

Answer: B

This question in 9706/12 Oct/Nov 2019

Q177 · The table gives information relating to the non-current assets of a business 9706/12 Oct/Nov 2019

3 The table gives information relating to the non-current assets of a business. $ net book value at the end of the year 25 000 net book value at the beginning of the year 16 000 depreciation charge for the year 5 000 additions at cost during the year 22 000 What is the net book value of disposals during the year? A $8000 B $14 000 C $18 000 D $24 000

1 marks

Answer: A

This question in 9706/12 Oct/Nov 2019

Q178 · The accounting year of a company ends on 31 December 9706/12 Oct/Nov 2019

4 The accounting year of a company ends on 31 December. It purchased a warehouse for $100 000 on 1 January 2013. The warehouse had an estimated useful economic life of 25 years. The company’s accounting policy is to depreciate the warehouse using the straight-line method. On 1 January 2018, the warehouse was revalued at $120 000. What was the depreciation charge for the year ended 31 December 2018? A $4000 B $4800 C $5000 D $6000

1 marks

Answer: D

This question in 9706/12 Oct/Nov 2019

Q179 · Which costs are not a part of capital expenditure when purchasing a new machine? 9706/13 Oct/Nov 2019

2 Which costs are not a part of capital expenditure when purchasing a new machine? 1 delivery costs 2 installation costs 3 machine operator training costs A 1 and 2 B 2 and 3 C 2 only D 3 only

1 marks

Answer: D

This question in 9706/13 Oct/Nov 2019

Q180 · A business had a non-current asset with a net book value of $18 000 at 31 December 2018 9706/13 Oct/Nov 2019

3 A business had a non-current asset with a net book value of $18 000 at 31 December 2018. It had been purchased during the year ended 31 December 2017. Depreciation is charged at a rate of 25% per annum using the reducing balance method. A full year’s depreciation is charged in the year of purchase. What was the original cost of the non-current asset? A $22 500 B $24 000 C $27 000 D $32 000

1 marks

Answer: D

This question in 9706/13 Oct/Nov 2019

Q181 · The following information relates to the disposal of a non-current asset 9706/13 Oct/Nov 2019

4 The following information relates to the disposal of a non-current asset. $ profit on disposal 5 200 cost of non-current asset sold 14 400 sales proceeds 6 800 What was the accumulated depreciation on the non-current asset sold? A $1600 B $2400 C $7600 D $12 800

1 marks

Answer: D

This question in 9706/13 Oct/Nov 2019

Q182 · The following costs for a business relate to a newly purchased machine 9706/12 Feb/March 2020

2 The following costs for a business relate to a newly purchased machine. 1 alterations to the factory building to install the machine 2 payment of insurance for the new machine 3 the final purchase price of the machine agreed with the supplier 4 the price of the machine before the discount from the supplier Which costs would be treated as capital expenditure? A 1, 2 and 3 B 1 and 3 only C 2 and 3 only D 2 and 4

1 marks

Answer: B

This question in 9706/12 Feb/March 2020

Q183 · The following information is available 9706/12 Feb/March 2020

3 The following information is available. $ freehold premises at cost 125 000 provision for depreciation of freehold premises 50 000 The premises were revalued at $180 000. Which entries are required to record the revaluation? income freehold premises provision for revaluation statement at cost account depreciation reserve A credit $105 000 debit $55 000 none debit $50 000 B debit $55 000 debit $75 000 debit $50 000 credit $180 000 C debit $75 000 debit $55 000 debit $50 000 credit $180 000 D none debit $55 000 debit $50 000 credit $105 000

1 marks

Answer: D

This question in 9706/12 Feb/March 2020

Q184 · A business has a year end of 31 December 9706/12 Feb/March 2020

4 A business has a year end of 31 December. It purchased a motor vehicle on 1 January 2017 for $15 000. The motor vehicle was sold on 31 March 2019 for $8000. Depreciation is calculated at 20% per annum using the reducing balance method on a month by month basis. What is the accumulated depreciation and profit/loss on disposal of the motor vehicle? accumulated depreciation profit/loss on disposal $ $ A 5400 1600 loss B 5400 1600 profit C 5880 1120 loss D 5880 1120 profit

1 marks

Answer: C

This question in 9706/12 Feb/March 2020

Q185 · What are the characteristics of non-current assets? 9706/11 May/June 2020

2 What are the characteristics of non-current assets? 1 They are not intended for resale. 2 They provide future economic benefits. 3 They prevent the company from going out of business. A 1 and 2 only B 1 and 3 only C 2 and 3 only D 1, 2 and 3

1 marks

Answer: A

This question in 9706/11 May/June 2020

Q186 · A business has a year end of 31 December 9706/11 May/June 2020

3 A business has a year end of 31 December. It depreciates its motor vehicles over four years using the straight-line method. A full year’s depreciation is charged in the year of purchase, but none in the year of sale. A motor vehicle purchased on 1 July 2016 for $18 000 had an estimated residual value of $4000. The motor vehicle was sold for $5000 on 31 December 2019. What was the profit or loss on disposal? A $1000 loss B $1000 profit C $2500 loss D $2500 profit

1 marks

Answer: C

This question in 9706/11 May/June 2020

Q187 · The following information is available in respect of the purchase of a new machine 9706/11 May/June 2020

4 The following information is available in respect of the purchase of a new machine. $ machine cost 80 000 less 10% trade discount 8 000 72 000 delivery cost 1 200 installation cost 1 800 annual maintenance cost 4 000 The business plans to keep the machine for 5 years. It is expected to be sold for $5000. What will be the annual depreciation charge using the straight-line method? A $13 400 B $14 000 C $14 800 D $15 600

1 marks

Answer: B

This question in 9706/11 May/June 2020

Q188 · A company purchased a machine on 1 April 2017 for $25 000 9706/12 May/June 2020

3 A company purchased a machine on 1 April 2017 for $25 000. It was depreciated at 20% per annum using the straight-line method. A full year’s depreciation is charged in the year of purchase but none in the year of sale. On 30 June 2019 the machine was sold for $12 500. The company year-end is 31 December. What was the profit or loss on the disposal of the machine? A $1250 loss B $1250 profit C $2500 loss D $2500 profit

1 marks

Answer: C

This question in 9706/12 May/June 2020

Q189 · Why do businesses charge depreciation on their non-current assets? 9706/12 May/June 2020

4 Why do businesses charge depreciation on their non-current assets? A to ensure that sufficient cash is available to replace the assets B to show the realisable value of the assets in the statement of financial position C to spread the cost of the assets over their estimated useful life D to show when the assets must be replaced

1 marks

Answer: C

This question in 9706/12 May/June 2020

Q190 · What are the characteristics of non-current assets? 9706/13 May/June 2020

2 What are the characteristics of non-current assets? 1 They are not intended for resale. 2 They provide future economic benefits. 3 They prevent the company from going out of business. A 1 and 2 only B 1 and 3 only C 2 and 3 only D 1, 2 and 3

1 marks

Answer: A

This question in 9706/13 May/June 2020

Q191 · A business has a year end of 31 December 9706/13 May/June 2020

3 A business has a year end of 31 December. It depreciates its motor vehicles over four years using the straight-line method. A full year’s depreciation is charged in the year of purchase, but none in the year of sale. A motor vehicle purchased on 1 July 2016 for $18 000 had an estimated residual value of $4000. The motor vehicle was sold for $5000 on 31 December 2019. What was the profit or loss on disposal? A $1000 loss B $1000 profit C $2500 loss D $2500 profit

1 marks

Answer: C

This question in 9706/13 May/June 2020

Q192 · The following information is available in respect of the purchase of a new machine 9706/13 May/June 2020

4 The following information is available in respect of the purchase of a new machine. $ machine cost 80 000 less 10% trade discount 8 000 72 000 delivery cost 1 200 installation cost 1 800 annual maintenance cost 4 000 The business plans to keep the machine for 5 years. It is expected to be sold for $5000. What will be the annual depreciation charge using the straight-line method? A $13 400 B $14 000 C $14 800 D $15 600

1 marks

Answer: B

This question in 9706/13 May/June 2020

Q193 · A company has two non-current assets 9706/11 Oct/Nov 2020

3 A company has two non-current assets. Details are as follows: cost residual asset date bought depreciation method $ value X 1 Jan 2018 10 000 straight-line life 5 years $2000 Y 1 Jan 2018 20 000 reducing balance rate 20% nil What was the total depreciation charge in the income statement for the year ended 31 December 2019? A $4800 B $5200 C $5600 D $6000

1 marks

Answer: A

This question in 9706/11 Oct/Nov 2020

Q194 · A business purchased a new machine on 1 January 2020 for $15 000 paying $10 000 by cheque 9706/11 Oct/Nov 2020

4 A business purchased a new machine on 1 January 2020 for $15 000 paying $10 000 by cheque. The balance was settled by part exchange of an old machine. This old machine had cost $12 000 on 1 January 2018 and had been expected to last for 6 years with a residual value of $2400. The business uses the straight-line method of depreciation. What was the loss on the disposal of the old machine? A $1400 B $3000 C $3800 D $4600

1 marks

Answer: C

This question in 9706/11 Oct/Nov 2020

Question 195 9706/12 Oct/Nov 2020

2 What is depreciation? A a means of allocating the cost of a non-current asset over its useful life B a measure of the decrease in market value of a non-current asset C an outflow of cash from the use of a non-current asset D the expense spent on the non-current asset

1 marks

Answer: A

This question in 9706/12 Oct/Nov 2020

Q196 · A trader depreciates fixtures and fittings at the rate of 10% per annum on cost 9706/12 Oct/Nov 2020

3 A trader depreciates fixtures and fittings at the rate of 10% per annum on cost. On 1 January 2019 a purchase of new fixtures and fittings, $5000, was posted to the advertising account in error. What was the effect of this error on the trader’s capital account on 31 December 2019? A overstated $4500 B overstated $5000 C understated $4500 D understated $5000

1 marks

Answer: C

This question in 9706/12 Oct/Nov 2020

Q197 · A company had a non-current asset which cost $370 000 9706/12 Oct/Nov 2020

4 A company had a non-current asset which cost $370 000. The asset had a 10-year useful life and an estimated residual value of $20 000. A full year’s charge for depreciation is made in every year of use. After four years the asset was sold. The loss on disposal was $30 000 and disposal costs were $10 000. What were the sale proceeds? A $192 000 B $200 000 C $202 000 D $210 000

1 marks

Answer: D

This question in 9706/12 Oct/Nov 2020

Q198 · A motor vehicle costing $8000 is depreciated by 25% per annum using the reducing balance… 9706/13 Oct/Nov 2020

3 A motor vehicle costing $8000 is depreciated by 25% per annum using the reducing balance method. After depreciating it for two years it was sold for $4000. What is the profit or loss on disposal? A $500 loss B $500 profit C $2000 loss D $2000 profit

1 marks

Answer: A

This question in 9706/13 Oct/Nov 2020

Q199 · A business purchased a new delivery van 9706/13 Oct/Nov 2020

4 A business purchased a new delivery van. The total amount paid is made up of the basic cost of the delivery and the following: 1 changing the inside to carry tools and materials 2 one year’s insurance and servicing 3 painting the exterior with the business name Which items are included in the total to be entered in non-current assets? A 1 and 2 only B 1 and 3 only C 2 and 3 only D 1, 2 and 3

1 marks

Answer: B

This question in 9706/13 Oct/Nov 2020

Q200 · Which item is not included as part of the capital cost of a new machine? 9706/12 Feb/March 2021

3 Which item is not included as part of the capital cost of a new machine? A cost of delivering the machine to the factory B cost of installing the new machine C interest on a loan used to buy the machine D invoice price of the machine

1 marks

Answer: C

This question in 9706/12 Feb/March 2021

Q201 · Why does a business charge depreciation on its non-current assets? 9706/12 Feb/March 2021

4 Why does a business charge depreciation on its non-current assets? A to retain profits for the replacement of worn out assets B to show the correct value of the asset in the statement of financial position C to show when an asset needs replacing D to spread the cost of the assets over their useful lives

1 marks

Answer: D

This question in 9706/12 Feb/March 2021

Q202 · The net book value of motor vehicles of a company is shown 9706/12 Feb/March 2021

5 The net book value of motor vehicles of a company is shown. beginning of end of the year the year $312 000 $305 000 During the year, an old vehicle was traded in as part exchange for a new vehicle. The part exchange value of the old vehicle was $8000. The remaining purchase price of the new vehicle, $30 000, was paid by cheque. What was the depreciation charge for the year? A $29 000 B $37 000 C $45 000 D $53 000

1 marks

Answer: C

This question in 9706/12 Feb/March 2021

Q203 · On 1 January 2020, Marek bought some machinery 9706/11 May/June 2021

2 On 1 January 2020, Marek bought some machinery. He paid a total of $50 000. Of this, $6000 was for maintenance of the machinery until 31 December 2022. Marek depreciates his machinery at the rate of 10% per annum. How was the expenditure recorded in Marek’s financial statements for the year ended 31 December 2020? non-current current income assets assets statement $ $ $ A 39 600 nil 10 400 B 39 600 4 000 6 400 C 41 600 4 000 4 400 D 45 000 nil 5 000

1 marks

Answer: B

This question in 9706/11 May/June 2021

Q204 · Which statements about depreciation are correct? 9706/11 May/June 2021

3 Which statements about depreciation are correct? 1 It is an application of the matching concept. 2 It provides funds for the replacement of a non-current asset. 3 It spreads the cost of a non-current asset over its useful life. A 1, 2 and 3 B 1 and 2 only C 1 and 3 only D 2 and 3 only

1 marks

Answer: C

This question in 9706/11 May/June 2021

Q205 · Which statement relating to depreciation is not correct? 9706/12 May/June 2021

2 Which statement relating to depreciation is not correct? A A business can never change its accounting policy on depreciation. B Depreciation is the allocation of the cost of a non-current asset over its useful life. C Freehold land is usually not depreciated. D Non-current assets of similar class are depreciated using the same method of depreciation.

1 marks

Answer: A

This question in 9706/12 May/June 2021

Q206 · Arnaud owned a vehicle which originally cost $20 000 9706/12 May/June 2021

3 Arnaud owned a vehicle which originally cost $20 000. During the year ended 31 May 2021, he paid for repairs of $3700 and provided depreciation of $4000. On 31 May 2021, the vehicle had a net book value of $12 000. Arnaud sold the vehicle on that date and the loss on disposal amounted to $2500. What were the cash inflows and outflows relating to the vehicle during the year? cash inflows cash outflows $ $ A 9 500 3 700 B 9 500 7 700 C 13 500 6 200 D 13 500 8 000

1 marks

Answer: A

This question in 9706/12 May/June 2021

Q207 · Two years ago a business purchased two machines costing $25 000 each 9706/12 May/June 2021

4 Two years ago a business purchased two machines costing $25 000 each. During the third year one of them with a net book value of $16 000 was sold. A new machine costing $30 000 was purchased. Depreciation is charged at 20% per annum using the reducing balance method on all the assets owned at the end of the accounting period. What was the depreciation charge for the third year? A $6000 B $9200 C $11 000 D $12 800

1 marks

Answer: B

This question in 9706/12 May/June 2021

Q208 · A business purchased a machine, making the following payments 9706/13 May/June 2021

3 A business purchased a machine, making the following payments. $ machine cost 7500 alterations to improve efficiency 1200 insurance for 12 months 400 installation costs 800 9900 What was the cost of the machine to be included in non-current assets? A $7500 B $8700 C $9500 D $9900

1 marks

Answer: C

This question in 9706/13 May/June 2021

Q209 · A business had a financial year end of 31 December 2020 9706/13 May/June 2021

4 A business had a financial year end of 31 December 2020. On 1 September 2020 it had sold an old motor vehicle and purchased a replacement. How were these transactions recorded in the provision for depreciation account on 1 September 2020? the transfer to the depreciation on the new disposal account was vehicle was recorded on recorded on the debit side the credit side A x x key B x Jv / = correct Cc Jv v X = not correct D v x

1 marks

Answer: D

This question in 9706/13 May/June 2021

Q210 · During the year ended 31 December 2017 a business purchased a vehicle for $23 500 9706/13 May/June 2021

5 During the year ended 31 December 2017 a business purchased a vehicle for $23 500. On 30 September 2020 it was sold for $3500. Depreciation was charged at 20% per annum using the straight-line method. A full year’s depreciation was charged in the year of purchase and the year of disposal. What was the profit or loss on disposal of the vehicle? A $1200 loss B $1200 profit C $5900 loss D $5900 profit

1 marks

Answer: A

This question in 9706/13 May/June 2021

Q211 · A company sold one of its delivery vehicles for $2800 after two years of use 9706/11 Oct/Nov 2021

3 A company sold one of its delivery vehicles for $2800 after two years of use. The original cost of the vehicle was $6500. The company depreciates its vehicles at 30% per annum using the reducing balance method. What was the profit or loss on disposal? A loss $200 B loss $385 C profit $200 D profit $385

1 marks

Answer: B

This question in 9706/11 Oct/Nov 2021

Q212 · A trader depreciates loose tools using the revaluation method 9706/11 Oct/Nov 2021

4 A trader depreciates loose tools using the revaluation method. Which account is credited at the end of the year to record depreciation on loose tools? A depreciation of loose tools B disposal C loose tools D provision for depreciation of loose tools

1 marks

Answer: C

This question in 9706/11 Oct/Nov 2021

Q213 · A business sold one of its non-current assets 9706/11 Oct/Nov 2021

5 A business sold one of its non-current assets. The following information relates to this asset. $ purchase price 50 000 depreciation to date of sale 20 000 sale price 60 000 What was the effect of this transaction on the net assets in the year of sale? A decrease of $30 000 B decrease of $60 000 C increase of $30 000 D increase of $60 000

1 marks

Answer: C

This question in 9706/11 Oct/Nov 2021

Q214 · A business has a financial year end of 31 December 9706/12 Oct/Nov 2021

3 A business has a financial year end of 31 December. It depreciates its machinery on a month-by-month basis. It uses the straight-line method at 10% per annum. It bought a machine, cost $12 000, on 1 January 2019 and sold it on 31 March 2020. Which entries relating to this machine were made in the provision for depreciation of machinery account for the year ended 31 December 2020? debit side credit side $ $ A 300 1500 B no entry 1200 C 1200 no entry D 1500 300

1 marks

Answer: D

This question in 9706/12 Oct/Nov 2021

Q215 · A business purchased a non-current asset for $500 000 with an expected life of 20 years 9706/12 Oct/Nov 2021

4 A business purchased a non-current asset for $500 000 with an expected life of 20 years. After that time it was expected to be sold for $100 000. It was depreciated using the straight-line method. The non-current asset was sold after 10 years for $120 000 with selling costs of $10 000. What was the loss on disposal? A $130 000 B $140 000 C $180 000 D $190 000

1 marks

Answer: D

This question in 9706/12 Oct/Nov 2021

Q216 · Which items are capital expenditure? 9706/12 Oct/Nov 2021

5 Which items are capital expenditure? 1 payment of wages to staff to install new equipment 2 purchase of a new computer for office 3 purchase of spare parts for factory equipment 4 use of factory machinery to repair owner’s car A 1 and 2 B 1 and 3 C 2 and 3 D 2 and 4

1 marks

Answer: A

This question in 9706/12 Oct/Nov 2021

Q217 · The accounting year end of a company is 31 December 9706/13 Oct/Nov 2021

3 The accounting year end of a company is 31 December. The company purchased a motor vehicle on 1 January 2020 and incurred the following costs. 1 cost, $30 000, of which half was paid by cheque. The balance was paid by a bank loan. Loan interest for the year ended 31 December 2020 was $2500. 2 delivery cost, $2000 3 engine improvement cost, $4000 4 repair and maintenance costs for three years, $5000 The motor vehicle was to be depreciated by 20% per annum using the straight-line method. What is the depreciation charge for the year ended 31 December 2020? A $4200 B $7200 C $7700 D $8200

1 marks

Answer: B

This question in 9706/13 Oct/Nov 2021

Q218 · A business sold a non-current asset 9706/13 Oct/Nov 2021

4 A business sold a non-current asset. It had been purchased for $15 000 and had an estimated life of 10 years, with no residual value. It was depreciated using the straight-line method. It was sold after six years. Disposal costs were $1000 and there was a profit on disposal of $3000. What was the sale price? A $8000 B $9000 C $10 000 D $13 000

1 marks

Answer: C

This question in 9706/13 Oct/Nov 2021

Q219 · Which statements about a depreciation charge for the year are correct? 9706/13 Oct/Nov 2021

5 Which statements about a depreciation charge for the year are correct? 1 It is a non-monetary expense. 2 It is debited to the provision for depreciation account. 3 It is only provided on non-current assets with an estimated useful life. A 1 and 2 B 1 and 3 C 2 and 3 D 3 only

1 marks

Answer: B

This question in 9706/13 Oct/Nov 2021

Q220 · Which item is an example of capital expenditure? 9706/12 Feb/March 2022

2 Which item is an example of capital expenditure? A cost of repairs to an office building B cost of repainting business name on delivery van C legal cost paid to purchase an office building D legal cost to collect outstanding receivables

1 marks

Answer: C

This question in 9706/12 Feb/March 2022

Q221 · On 1 July 2021, Tim bought a delivery van for $10 000 9706/12 Feb/March 2022

3 On 1 July 2021, Tim bought a delivery van for $10 000. He paid an additional $900 to have racks fitted inside, and $800 for a year’s insurance. Tim provides for depreciation at the rate of 10% per annum. A full year’s depreciation is charged in the year of acquisition. What was the total for expenses recorded in Tim’s income statement in respect of the van for the year ended 30 September 2021? A $1290 B $1690 C $2100 D $2500

1 marks

Answer: A

This question in 9706/12 Feb/March 2022

Q222 · A business has a year end of 31 December 9706/12 Feb/March 2022

4 A business has a year end of 31 December. It purchased a non-current asset on 1 January 2020 for $100 000. The asset was depreciated using the reducing balance method at 20% per annum. It was sold for $40 000 on 1 January 2022. What was the loss on disposal? A $20 000 B $24 000 C $40 000 D $60 000

1 marks

Answer: B

This question in 9706/12 Feb/March 2022

Q223 · Which accounting concepts are not reasons for including depreciation in the income… 9706/11 May/June 2022

2 Which accounting concepts are not reasons for including depreciation in the income statement? 1 matching 2 materiality 3 prudence 4 realisation A 1 and 4 B 2 and 3 C 3 only D 4 only

1 marks

Answer: D

This question in 9706/11 May/June 2022

Q224 · On 1 January 2019, a non-current asset was purchased at a cost of $290 000 9706/11 May/June 2022

3 On 1 January 2019, a non-current asset was purchased at a cost of $290 000. Delivery and installation costs of $10 000 were also paid. The reducing balance method is used to depreciate the asset at a rate of 20% per annum. A full year’s depreciation is charged in the year of acquisition and none in the year of disposal. On 31 December 2021, the non-current asset was sold for $205 000. Disposal costs of $5000 were also paid. What was the profit on disposal? A $8000 B $13 000 C $14 400 D $46 400

1 marks

Answer: A

This question in 9706/11 May/June 2022

Q225 · A sole trader purchased a machine costing $30 000 with an estimated residual value of… 9706/11 May/June 2022

4 A sole trader purchased a machine costing $30 000 with an estimated residual value of $5000. It was expected to have a useful life of five years. At the end of the fourth year, the machine was sold at a profit of $200. Depreciation is charged using the straight-line method. A full year’s depreciation is charged for each year the asset is owned. What was the amount of sale proceeds? A $5200 B $6200 C $10 200 D $15 200

1 marks

Answer: C

This question in 9706/11 May/June 2022

Q226 · A sole trader has changed the method of depreciating his machinery from the reducing… 9706/12 May/June 2022

2 A sole trader has changed the method of depreciating his machinery from the reducing balance method in the year 1 to the straight-line method in the year 2 of trading. The same percentage rate of depreciation is used in both cases. What is the effect on the net book value of machinery and profit for the year 2? net book value profit for the year 2 A higher higher B higher lower C lower higher D lower lower

1 marks

Answer: D

This question in 9706/12 May/June 2022

Q227 · Paul has a year end of 31 December 9706/12 May/June 2022

3 Paul has a year end of 31 December. On 1 January 2020, he bought a non-current asset for $10 000. He sold it on 1 January 2021 for $8500. Paul usually provides depreciation at the rate of 10% per annum. A full year’s depreciation is charged in the year of acquisition and none in the year of disposal. He forgot to provide for any depreciation on this non-current asset. What was the effect of this error on Paul’s profit for the year ended 31 December 2021? A $1000 higher B $1000 lower C $1500 higher D $1500 lower

1 marks

Answer: B

This question in 9706/12 May/June 2022

Q228 · A business depreciates its machinery at 10% per annum using the straight-line method on a… 9706/12 May/June 2022

4 A business depreciates its machinery at 10% per annum using the straight-line method on a month-by-month basis. The business’s financial year end is 30 June. Machinery which had cost $6600 on 1 April 2020 was sold on 30 November 2021. The profit on sale was $350. What were the sale proceeds? A $5150 B $5425 C $5850 D $6125

1 marks

Answer: C

This question in 9706/12 May/June 2022

Q229 · Which item should be treated as capital expenditure? 9706/13 May/June 2022

2 Which item should be treated as capital expenditure? A cost of a printer for an existing computer system B rent paid on a factory, whilst the company negotiated the purchase of the factory C repainting the wooden office door D repair costs to a car which are not covered by insurance

1 marks

Answer: A

This question in 9706/13 May/June 2022

Q230 · A business has a financial year end of 31 December 9706/13 May/June 2022

3 A business has a financial year end of 31 December. It purchased a vehicle on 1 January 2019 for $30 000. The business depreciates vehicles at the rate of 20% per annum using the reducing balance method. Depreciation is charged on a month-by-month basis. The vehicle was sold on 30 September 2021. A profit on disposal of $3000 had been calculated. However, no entries had been made to record the depreciation for 2021. What was the effect of not recording the depreciation for 2021 on the profit on disposal? A $2880 overstated B $3840 overstated C $2880 understated D $3840 understated

1 marks

Answer: C

This question in 9706/13 May/June 2022

Q231 · A trader bought a machine on 1 January 2019 9706/13 May/June 2022

4 A trader bought a machine on 1 January 2019. He depreciated it at the rate of 10% per annum using the straight-line method. He sold this machine on 1 January 2021 for $4000. The profit on disposal was $200. How much had the machine cost on 1 January 2019? A $4560 B $4750 C $5040 D $5250

1 marks

Answer: B

This question in 9706/13 May/June 2022

Q232 · Which statements about the reducing balance method of depreciation are correct? 9706/11 Oct/Nov 2022

2 Which statements about the reducing balance method of depreciation are correct? 1 The annual percentage depreciation rate changes each year. 2 The annual depreciation charge remains the same each year. 3 The annual percentage depreciation rate remains the same each year. 4 The annual depreciation charge falls each year. A 1 and 2 B 1 and 4 C 2 and 3 D 3 and 4

1 marks

Answer: D

This question in 9706/11 Oct/Nov 2022

Q233 · On 1 April 2021 a business purchased a machine for $120 000 with an estimated residual… 9706/11 Oct/Nov 2022

3 On 1 April 2021 a business purchased a machine for $120 000 with an estimated residual value of $12 000. On 1 July 2022 the machine was sold for $100 000. Machinery is depreciated at the rate of 20% per annum using the straight-line method. Depreciation is calculated for each month of ownership. Which entry should be made in the provision for depreciation of machinery account for the disposal of the machine? A $21 600 credit B $21 600 debit C $27 000 credit D $27 000 debit

1 marks

Answer: D

This question in 9706/11 Oct/Nov 2022

Q234 · Sue purchased a new machine 9706/11 Oct/Nov 2022

4 Sue purchased a new machine. She depreciated it at a rate of 40% per annum using the reducing balance method. After two years its net book value was $3600. What was the purchase price of the machine? A $7056 B $9216 C $10 000 D $22 500

1 marks

Answer: C

This question in 9706/11 Oct/Nov 2022

Q235 · The following information is available for a business for the year ended 31 March 2022 9706/11 Oct/Nov 2022

13 The following information is available for a business for the year ended 31 March 2022. $ non-current assets at cost at 1 April 2021 62 000 provision for depreciation on non-current assets at 1 April 2021 12 000 expenses paid by cash and cheques during the year 42 200 expenses prepaid at 31 March 2022 4 600 trade receivables at 31 March 2022 25 000 A provision for doubtful debts is to be created at 2% of trade receivables. Depreciation on non-current assets is to be provided at 20% using the reducing balance method. What was the total of expenses for the year? A $47 600 B $48 100 C $50 500 D $57 300

1 marks

Answer: B

This question in 9706/11 Oct/Nov 2022

Q236 · Why is it important for a trader to distinguish between capital expenditure and revenue… 9706/12 Oct/Nov 2022

2 Why is it important for a trader to distinguish between capital expenditure and revenue expenditure? 1 to apply the realisation concept 2 to know which method of depreciation to use 3 to obtain a more accurate profit figure A 1 and 2 B 1 only C 2 and 3 D 3 only

1 marks

Answer: D

This question in 9706/12 Oct/Nov 2022

Q237 · A company purchased a new vehicle for $30 000 9706/12 Oct/Nov 2022

3 A company purchased a new vehicle for $30 000. It part-exchanged an existing vehicle at a value of $6500, with the balance being paid by cheque. The part-exchanged vehicle originally cost $12 000 and had a net book value of $4800 on disposal. Which entries will be made in the accounts? income statement bank account A $1700 income motor vehicle at cost $23 500 credit B $1700 expense motor vehicle at cost $30 000 debit C $5500 expense motor vehicle at cost $23 500 debit D $5500 income motor vehicle at cost $30 000 credit

1 marks

Answer: A

This question in 9706/12 Oct/Nov 2022

Q238 · At 31 December 2021 a business had a non-current asset with a net book value of $18 000 9706/12 Oct/Nov 2022

4 At 31 December 2021 a business had a non-current asset with a net book value of $18 000. It had been purchased during the year ended 31 December 2020. Depreciation is charged at a rate of 25% per annum using the reducing balance method. A full year’s depreciation is charged in the year of purchase. What was the original cost of the non-current asset? A $22 500 B $24 000 C $27 000 D $32 000

1 marks

Answer: D

This question in 9706/12 Oct/Nov 2022

Q239 · A business sold a non-current asset at a profit 9706/13 Oct/Nov 2022

2 A business sold a non-current asset at a profit. What are the entries to be made in a disposal account? debit credit A non-current asset at cost provision for depreciation bank income statement B non-current asset at cost provision for depreciation income statement bank C provision for depreciation non-current asset at cost bank income statement D provision for depreciation non-current asset at cost income statement bank

1 marks

Answer: B

This question in 9706/13 Oct/Nov 2022

Q240 · On 1 January 2020 a business purchased new delivery vehicles 9706/13 Oct/Nov 2022

3 On 1 January 2020 a business purchased new delivery vehicles. The following information is available. $ total purchase cost 300 000 cost of painting delivery vehicles in the company’s colours 4 000 total annual maintenance cost 16 000 The company depreciates delivery vehicles using the reducing balance method at a rate of 40% per annum. What is the depreciation charge for the delivery vehicles for the year ended 31 December 2021? A $72 000 B $72 960 C $75 840 D $76 800

1 marks

Answer: B

This question in 9706/13 Oct/Nov 2022

Q241 · The following information is available in respect of a trader’s non-current assets 9706/13 Oct/Nov 2022

4 The following information is available in respect of a trader’s non-current assets. $ accumulated depreciation at 31 May 2020 40 000 depreciation charge for the year ended 31 May 2021 9 000 accumulated depreciation at 31 May 2021 46 000 During the year ended 31 May 2021, a non-current asset which had cost $10 000 was sold. There was a loss on disposal of $1200. What were the sale proceeds? A $5800 B $7000 C $8200 D $8800

1 marks

Answer: A

This question in 9706/13 Oct/Nov 2022

Q242 · Non-current assets at the end of Year 1 were recorded as cost, $500 000, and carrying… 9706/12 Feb/March 2023

6 Non-current assets at the end of Year 1 were recorded as cost, $500 000, and carrying value, $360 000. During Year 2, certain assets were sold. They had originally cost $100 000 and had been depreciated by $40 000. The depreciation charge for the remaining non-current assets in Year 2 was $30 000. What was the carrying value of non-current assets at the end of Year 2? A $270 000 B $300 000 C $330 000 D $370 000

1 marks

Answer: A

This question in 9706/12 Feb/March 2023

Q243 · Phil purchased new premises and made the following payments 9706/11 May/June 2023

2 Phil purchased new premises and made the following payments. $ premises 60 000 legal fees relating to purchase 2 000 insurance for the financial year 700 When recording the purchase of the premises, the legal fees and insurance were both treated incorrectly. Phil’s accounting policy is not to charge depreciation on non-current assets in the year of purchase. What was the effect of the errors on the profit for the year? A $1300 overstated B $1300 understated C $2700 overstated D $2700 understated

1 marks

Answer: B

This question in 9706/11 May/June 2023

Q244 · The delivery cost of a machine purchased for business use has been included in carriage… 9706/11 May/June 2023

3 The delivery cost of a machine purchased for business use has been included in carriage inwards. What is the effect on the profit for the year and on total assets? profit for total assets the year A overstated overstated B overstated understated C understated overstated D understated understated

1 marks

Answer: D

This question in 9706/11 May/June 2023

Q245 · Which factors are considered when choosing the most appropriate method of calculating… 9706/11 May/June 2023

4 Which factors are considered when choosing the most appropriate method of calculating depreciation? 1 the benefit received over the years by using the non-current asset 2 the non-current asset has a clearly defined life 3 the replacement cost of the non-current asset A 1 and 2 B 1 and 3 C 1 only D 2 and 3

1 marks

Answer: A

This question in 9706/11 May/June 2023

Q246 · The carrying value of a company’s non-current assets at the beginning and end of a… 9706/11 May/June 2023

5 The carrying value of a company’s non-current assets at the beginning and end of a financial year is shown. $ at 1 January 100 000 at 31 December 80 000 During the year non-current assets were sold for $20 000 cash, realising a profit on disposal of $5000. Depreciation charged for the year was $8000. What was the expenditure on non-current assets during the year? A $3000 B $5000 C $8000 D $15 000

1 marks

Answer: A

This question in 9706/11 May/June 2023

Q247 · Which items relating to new manufacturing equipment are capital expenditure? 9706/12 May/June 2023

3 Which items relating to new manufacturing equipment are capital expenditure? 1 cost of the equipment 2 delivery cost of the equipment 3 staff training cost to operate the equipment A 1 and 2 B 1 and 3 C 1 only D 2 and 3

1 marks

Answer: A

This question in 9706/12 May/June 2023

Q248 · The financial year of a business ends on 31 December 9706/12 May/June 2023

4 The financial year of a business ends on 31 December. At the beginning of the financial year, the following payments were made in respect of a new machine. $ purchase cost 60 000 installation cost 10 000 It was discovered that the installation cost had been incorrectly treated as an expense. It is the policy of the business to depreciate machinery at 20% per annum using the straight-line method. What was the effect of this error on the profit for the year ended 31 December? A $8000 overstated B $8000 understated C $12 000 overstated D $12 000 understated

1 marks

Answer: B

This question in 9706/12 May/June 2023

Q249 · The motor vehicles at cost account had a balance of $90 000 at the beginning of the year… 9706/12 May/June 2023

5 The motor vehicles at cost account had a balance of $90 000 at the beginning of the year on 1 January. On 1 September in the same year, the following transactions took place. 1 A motor vehicle was disposed of. The vehicle had been purchased in the previous year for $21 000. 2 A new motor vehicle was purchased at a cost of $24 000. Depreciation is calculated at 20% using the straight-line method. Depreciation is charged on a month-by-month basis for each month the motor vehicle is owned. What was the depreciation charge for the year ended 31 December? A $15 400 B $18 200 C $18 600 D $22 400

1 marks

Answer: B

This question in 9706/12 May/June 2023

Q250 · Which item is revenue expenditure? 9706/13 May/June 2023

4 Which item is revenue expenditure? A installation costs of machinery B legal fees on the purchase of premises C number plates on a new motor vehicle D redecorating office premises

1 marks

Answer: D

This question in 9706/13 May/June 2023

Q251 · On 1 January, the owner of a business purchased a new machine 9706/13 May/June 2023

5 On 1 January, the owner of a business purchased a new machine. All non-current assets are depreciated by 25% per annum. During the year, the following payments were made in respect of the machine. $ cost of machine 16 000 delivery 400 installation 600 one year’s insurance 100 A charge of $5100 for these items was included in the draft statement of profit or loss for the year ended 31 December. By how much was the draft profit for the year understated? A $300 B $450 C $750 D $850

1 marks

Answer: C

This question in 9706/13 May/June 2023

Q252 · What is the purpose of providing for depreciation? 9706/13 May/June 2023

6 What is the purpose of providing for depreciation? A to apply the matching principle B to calculate the true value of non-current assets C to ensure that money is available for repair of non-current assets D to provide cash in the business for replacement of non-current assets

1 marks

Answer: A

This question in 9706/13 May/June 2023

Q253 · A business purchased a vehicle which had cost $27 000 and had an estimated residual value… 9706/13 May/June 2023

7 A business purchased a vehicle which had cost $27 000 and had an estimated residual value of $1000. Depreciation of $18 200 has been charged on this vehicle. The vehicle was sold in part exchange for a new vehicle which cost $29 500. A cheque for $19 000 was paid in settlement of the transaction. Which profit or loss was made on the sale of the vehicle? A loss $1700 B loss $2700 C profit $1700 D profit $2700

1 marks

Answer: C

This question in 9706/13 May/June 2023

Q254 · Which statement identifies why depreciation is provided on non-current assets? 9706/11 Oct/Nov 2023

5 Which statement identifies why depreciation is provided on non-current assets? A so that the cost is allocated to periods that benefit from them B so that the realisation concept is applied C so that there is enough cash in the business to replace them D so that they are shown at market value

1 marks

Answer: A

This question in 9706/11 Oct/Nov 2023

Q255 · New equipment costing $40 000, with an estimated residual value of $6000, was acquired at… 9706/11 Oct/Nov 2023

6 New equipment costing $40 000, with an estimated residual value of $6000, was acquired at the beginning of the year on 1 January. On the same date the business made the following payments in respect of the equipment. $ delivery 5000 installation 7000 8-year maintenance contract 8000 The equipment has an estimated life of 8 years. The business uses the straight-line method of depreciation. What would be the carrying amount for this item at the end of the year on 31 December? A $35 750 B $46 250 C $52 500 D $53 250

1 marks

Answer: B

This question in 9706/11 Oct/Nov 2023

Q256 · A business purchased a shop and incurred the following costs 9706/12 Oct/Nov 2023

4 A business purchased a shop and incurred the following costs. $ purchase price of the shop 680 000 legal fees incurred in the purchase of the shop 7 200 cost of initial inventory 12 500 cost of installing air conditioning 47 300 What was the total capital expenditure? A $680 000 B $687 200 C $734 500 D $747 000

1 marks

Answer: C

This question in 9706/12 Oct/Nov 2023

Q257 · A used motor vehicle was part exchanged for a new motor vehicle 9706/12 Oct/Nov 2023

5 A used motor vehicle was part exchanged for a new motor vehicle. The balance of the purchase cost of the new motor vehicle was settled by cheque. What were the entries to record the part-exchange value? account debited account credited A bank disposal B bank motor vehicles C motor vehicles bank D motor vehicles disposal

1 marks

Answer: D

This question in 9706/12 Oct/Nov 2023

Q258 · A non-current asset of a business cost $300 000 in 2021 9706/12 Oct/Nov 2023

6 A non-current asset of a business cost $300 000 in 2021. It is depreciated using the reducing balance method at the rate of 40% per annum. A full year’s depreciation is provided in the year of acquisition but none in the year of sale. The financial year of the business ends on 31 December. In 2023, the item was sold for $150 000. Disposal costs of $15 000 were incurred. What was the profit on disposal? A $27 000 B $42 000 C $57 000 D $70 200

1 marks

Answer: A

This question in 9706/12 Oct/Nov 2023

Q259 · A business prepared its statement of profit or loss for the year ended 31 December 9706/12 Oct/Nov 2023

14 A business prepared its statement of profit or loss for the year ended 31 December. During that year, on 30 April, a non-current asset had been sold. The following information is available in respect of this item. cost $130 000 sale proceeds $53 500 residual value $10 000 carrying value at 1 January $52 500 expected life 8 years Non-current assets are depreciated using the straight-line method, with depreciation being charged for each month of ownership. No accounting entries had been made in respect of this non-current asset for the year ended 31 December. What was the effect of this omission on the profit for the year? A $1000 understated B $5000 overstated C $6000 understated D $9000 overstated

1 marks

Answer: A

This question in 9706/12 Oct/Nov 2023

Q260 · A business incurs the following business expenditure during the year 9706/13 Oct/Nov 2023

5 A business incurs the following business expenditure during the year. $ purchase of a machine 9 700 3-year maintenance for the machine 10 000 replacing the wheels of a motor car 8 500 upgrading the hardware of a computer 5 600 What are the total costs to be included in the non-current assets account during the year? A $15 300 B $15 600 C $23 800 D $25 300

1 marks

Answer: A

This question in 9706/13 Oct/Nov 2023

Q261 · What is a reason for providing for depreciation of non-current assets? 9706/13 Oct/Nov 2023

6 What is a reason for providing for depreciation of non-current assets? A to ensure non-current assets are replaced when they are worn out B to match the cost to the revenue earned each year by the non-current assets C to provide funds for purchasing replacement non-current assets D to show the amount they would realise if non-current assets were sold

1 marks

Answer: B

This question in 9706/13 Oct/Nov 2023

Q262 · A business uses the straight-line method of depreciation 9706/13 Oct/Nov 2023

7 A business uses the straight-line method of depreciation. A machine which it has owned for three years has a carrying value of $13 000 at the end of the third year. When purchased, it was estimated that it had a life of five years and a residual value of $5000. What was the original cost of the machine? A $18 000 B $20 000 C $25 000 D $32 500

1 marks

Answer: C

This question in 9706/13 Oct/Nov 2023

Q263 · What are the characteristics of non-current assets? 9706/12 Feb/March 2024

5 What are the characteristics of non-current assets? 1 They are not intended for resale. 2 They provide future economic benefits. 3 They prevent the company from going out of business. A 1 and 2 only B 1 and 3 only C 2 and 3 only D 1, 2 and 3

1 marks

Answer: A

This question in 9706/12 Feb/March 2024

Q264 · At the beginning of the financial year on 1 January, a business acquired a new motor… 9706/12 Feb/March 2024

6 At the beginning of the financial year on 1 January, a business acquired a new motor vehicle for $34 000. In error, this was recorded in the account for motor expenses. Motor vehicles are depreciated using the reducing balance method at the rate of 30% per annum. It is estimated that the motor vehicle will have a residual value of $4000 at the end of its life. If the error is not corrected, what will be the effect on the profit for the year ended 31 December? A $10 200 overstated B $23 800 understated C $25 000 understated D $34 000 understated

1 marks

Answer: B

This question in 9706/12 Feb/March 2024

Q265 · A company purchased a machine on 1 April 2021 for $25 000 9706/12 Feb/March 2024

7 A company purchased a machine on 1 April 2021 for $25 000. It was depreciated at 20% per annum using the straight-line method. A full year’s depreciation is charged in the year of purchase but none in the year of sale. On 30 June 2023 the machine was sold for $12 500. The company’s year end is 31 December. What was the profit or loss on the disposal of the machine? A $1250 loss B $1250 profit C $2500 loss D $2500 profit

1 marks

Answer: C

This question in 9706/12 Feb/March 2024

Q266 · Why does a business charge depreciation? 9706/11 May/June 2024

3 Why does a business charge depreciation? 1 to be able to replace an asset at the end of its useful life 2 to charge the cost of an asset to each period that benefits from its use 3 to treat each asset according to the concept of consistency A 1 and 2 B 2 only C 2 and 3 D 3 only

1 marks

Answer: B

This question in 9706/11 May/June 2024

Q267 · The following information relates to the non-current assets of a business that was formed… 9706/11 May/June 2024

4 The following information relates to the non-current assets of a business that was formed three years ago. $ cost at start of year 1 10 000 accumulated depreciation at end of year 3 6 000 draft profit for year 3 18 000 In calculating the draft profit for year 3, depreciation has been consistently charged using the straight-line method. Prior to finalising the accounts, the business decided to change the method of depreciation for year 3 to the reducing balance method at a rate of 25% per annum. What was the revised profit for year 3? A $16 000 B $17 500 C $18 500 D $19 000

1 marks

Answer: C

This question in 9706/11 May/June 2024

Q268 · Non-current assets, and depreciation at 10% of cost was charged to the draft statement of… 9706/13 May/June 2024

4 non-current assets, and depreciation at 10% of cost was charged to the draft statement of profit or loss for the period. In addition the business paid $14 000 for installation of the machinery and $6000 for insuring the machine. These amounts were treated as revenue expenditure for the period. The draft statement of profit or loss for the period showed a profit of $50 000. What is the revised profit for the period? A $48 600 B $50 000 C $62 600 D $68 000

1 marks

Answer: C

This question in 9706/13 May/June 2024

Q269 · Sara bought a non-current asset 9706/13 May/June 2024

6 Sara bought a non-current asset. Depreciation was provided at the rate of 10% per annum in years 1 and 2. It was sold at a profit in year 3. The policy of the business is not to charge depreciation in the year of disposal. How would profits be affected if the rate had been 15% per annum? profit in profit in years 1 and 2 year 3 A higher higher B higher lower C lower higher D lower lower

1 marks

Answer: C

This question in 9706/13 May/June 2024

Q270 · A business buys a vehicle for $10 000 on 1 January Year 1 and sells it for $6500 on 1… 9706/13 May/June 2024

7 A business buys a vehicle for $10 000 on 1 January Year 1 and sells it for $6500 on 1 January Year 3. The business has depreciated the vehicle at 10% a year, using the straight-line method. The business provides a full year’s depreciation in the year of purchase and none in the year of disposal. Which amount for profit or loss will appear in the disposal account, and on what side of the disposal account will it be shown? A $1500 on the credit side B $1500 on the debit side C $2500 on the credit side D $2500 on the debit side

1 marks

Answer: A

This question in 9706/13 May/June 2024

Q271 · In a draft statement of profit or loss, two errors were discovered 9706/13 May/June 2024

13 In a draft statement of profit or loss, two errors were discovered. 1 A profit of $6000 on the disposal of equipment had been treated as a loss. 2 A charge of $18 000 for the depreciation of a motor vehicle had been omitted. What was the effect of these errors on the draft profit for the year? A overstated $6000 B overstated $12 000 C understated $6000 D understated $12 000

1 marks

Answer: A

This question in 9706/13 May/June 2024

Q272 · Details regarding the purchase of a non-current asset are as follows: $ cost of new… 9706/11 Oct/Nov 2024

5 Details regarding the purchase of a non-current asset are as follows: $ cost of new machine 20000 expected residual value 5000 installation cost of new machine 3000 cost of inventory for use in new machine 6000 Which amount was recorded as capital expenditure for the new machine? A $15000 B $20000 C $23000 D $29000

1 marks

Answer: C

This question in 9706/11 Oct/Nov 2024

Q273 · A business depreciates its non-current assets at 20% using the straight-line method 9706/11 Oct/Nov 2024

7 A business depreciates its non-current assets at 20% using the straight-line method. Depreciation is calculated on a time basis in the year of acquisition and disposal. $ non-current assets, at cost, 31 December (previous year) 200000 purchase of machinery 1 January (current year) 50000 disposal of machinery 30 September (current year) 40000 non-current assets, at cost, 31 December (current year) 210000 What is the depreciation charge for non-current assets for the current year ended 31 December? A $42000 B $48000 C $50000 D $52000

1 marks

Answer: B

This question in 9706/11 Oct/Nov 2024

Q274 · Non-current assets can be depreciated using a number of methods 9706/12 Oct/Nov 2024

6 Non-current assets can be depreciated using a number of methods. How is the most appropriate method decided? A The method chosen improves the profit for the year of the business. B The method chosen is easily understood by the users of financial information. C The method chosen is easy to calculate. D The method chosen reflects the pattern of use of the non-current assets.

1 marks

Answer: D

This question in 9706/12 Oct/Nov 2024

Q275 · Ryan purchased a van for $16000 on 31 December 2021 9706/12 Oct/Nov 2024

7 Ryan purchased a van for $16000 on 31 December 2021. It is his policy to apply 25% per annum reducing balance depreciation for each part of the year the asset is held. Ryan traded the van in on 1 July 2024 for a $6150 reduction on the cost of a new van. What was the profit or loss made on the disposal of the van? A $600 loss B $1725 loss C $150 profit D $2150 profit

1 marks

Answer: B

This question in 9706/12 Oct/Nov 2024

Q276 · A business recorded expenditure on improving a non-current asset as revenue expenditure 9706/13 Oct/Nov 2024

4 A business recorded expenditure on improving a non-current asset as revenue expenditure. What is the effect of this error on the carrying value of non-current assets and profit for the year? carrying value of profit for non-current the year assets A overstated overstated B overstated understated C understated overstated D understated understated

1 marks

Answer: D

This question in 9706/13 Oct/Nov 2024

Q277 · A car dealer and garage owner has the following vehicles at her premises 9706/13 Oct/Nov 2024

5 A car dealer and garage owner has the following vehicles at her premises. 1 breakdown truck for recovering customers’ vehicles 2 new cars in the showroom 3 service department car for loan to customers 4 used cars in the showroom Which should be classified as non-current assets? A 1 , 2 and 3 B 1 and 3 only C 1 and 4 D 2 and 4

1 marks

Answer: B

This question in 9706/13 Oct/Nov 2024

Q278 · The table shows details of a freehold property 9706/13 Oct/Nov 2024

6 The table shows details of a freehold property. $ historical cost 80000 depreciation 25000 The property is to be shown in the statement of financial position at its current valuation of $100000. Which entries are to be made in the ledger accounts? account to be debited $ account to be credited $ A non-current asset 20000 statement of profit or loss 20000 B non-current asset 20000 revaluation reserve 45000 provision for depreciation 25000 C non-current asset 45000 statement of profit or loss 20000 provision for depreciation 25000 D non-current asset 20000 revaluation reserve 20000

1 marks

Answer: B

This question in 9706/13 Oct/Nov 2024

Q279 · The following information relates to the motor vehicles of a business 9706/13 Oct/Nov 2024

7 The following information relates to the motor vehicles of a business. 1 January 2021 31 December 2021 $ $ carrying value 398000 480000 During the year 2021 the following occurred. 1 Additional motor vehicles costing $195000 were purchased. 2 A motor vehicle (original cost $80000) was sold for $24000 at a profit of $2000. What was the depreciation charge for 2021? A $87000 B $89000 C $91000 D $113000

1 marks

Answer: C

This question in 9706/13 Oct/Nov 2024

Q280 · A business owns a property which is rented out to tenants 9706/11 May/June 2025

4 A business owns a property which is rented out to tenants. Which of the following costs should be treated as capital expenditure? A extending the kitchen area B legal fee for a 5-year tenancy agreement C repainting the property D replacing a water pipe

1 marks

Answer: A

This question in 9706/11 May/June 2025

Q281 · Which statements describe factors that may cause a non-current asset to depreciate? 9706/11 May/June 2025

5 Which statements describe factors that may cause a non-current asset to depreciate? 1 a reduction in the estimated residual value of the non-current asset 2 the introduction of new technology making the non-current asset obsolete 3 a change in the estimated useful life of the non-current asset 4 physical deterioration due to increased use of the non-current asset A 1, 3 and 4 B 1 and 2 only C 2, 3 and 4 D 2 and 4 only

1 marks

Answer: D

This question in 9706/11 May/June 2025

Q282 · A business purchased a non-current asset which had an estimated life of 10 years 9706/11 May/June 2025

6 A business purchased a non-current asset which had an estimated life of 10 years. It is depreciated using the straight-line method. At the date of sale, 5 years’ depreciation had been charged. The following information is available. $ original purchase price 100000 estimated residual value when purchased 20000 selling costs 8000 loss on sale 10000 What were the sale proceeds? A $48000 B $50000 C $58000 D $62000

1 marks

Answer: C

This question in 9706/11 May/June 2025

Q283 · Which accounting concepts are applied when depreciating non-current assets? 9706/12 May/June 2025

3 Which accounting concepts are applied when depreciating non-current assets? 1 consistency 2 matching/accruals 3 objectivity 4 prudence A 1 and 2 only B 1 and 3 C 1, 2 and 4 D 2, 3 and 4

1 marks

Answer: C

This question in 9706/12 May/June 2025

Q284 · The financial statements were prepared using the following details 9706/12 May/June 2025

5 The financial statements were prepared using the following details. $ purchase cost of machinery (included $450 for 16950 repairs to the machinery) lighting and heating (included $250 for wiring in 1780 the factory extension) carriage inwards (included $45 for delivery of new 230 machinery) What will be the amount of the decrease in non-current assets when capital and revenue items are treated correctly (ignore depreciation)? A $155 B $200 C $405 D $450

1 marks

Answer: A

This question in 9706/12 May/June 2025

Q285 · What is the purpose of depreciating a non-current asset? 9706/12 May/June 2025

6 What is the purpose of depreciating a non-current asset? A to allocate its cost over its useful life B to reflect its market value C to reflect its replacement cost D to reserve funds for its future replacement

1 marks

Answer: A

This question in 9706/12 May/June 2025

Q286 · The non-current assets of a business are shown in the table 9706/12 May/June 2025

7 The non-current assets of a business are shown in the table. end of the year start of the year $ $ cost 360000 300000 accumulated depreciation 120 000 75 000 carrying value 240000 225000 During the year, non-current assets costing $110000 were bought, and non-current assets, with a carrying value of $20000, were sold. What was the depreciation charge for the year? A $35000 B $45000 C $50000 D $75000

1 marks

Answer: D

This question in 9706/12 May/June 2025

Q287 · A business owns a property which is rented out to tenants 9706/13 May/June 2025

4 A business owns a property which is rented out to tenants. Which of the following costs should be treated as capital expenditure? A extending the kitchen area B legal fee for a 5-year tenancy agreement C repainting the property D replacing a water pipe

1 marks

Answer: A

This question in 9706/13 May/June 2025

Q288 · Which statements describe factors that may cause a non-current asset to depreciate? 9706/13 May/June 2025

5 Which statements describe factors that may cause a non-current asset to depreciate? 1 a reduction in the estimated residual value of the non-current asset 2 the introduction of new technology making the non-current asset obsolete 3 a change in the estimated useful life of the non-current asset 4 physical deterioration due to increased use of the non-current asset A 1, 3 and 4 B 1 and 2 only C 2, 3 and 4 D 2 and 4 only

1 marks

Answer: D

This question in 9706/13 May/June 2025

Q289 · A business purchased a non-current asset which had an estimated life of 10 years 9706/13 May/June 2025

6 A business purchased a non-current asset which had an estimated life of 10 years. It is depreciated using the straight-line method. At the date of sale, 5 years’ depreciation had been charged. The following information is available. $ original purchase price 100000 estimated residual value when purchased 20000 selling costs 8000 loss on sale 10000 What were the sale proceeds? A $48000 B $50000 C $58000 D $62000

1 marks

Answer: C

This question in 9706/13 May/June 2025

Q290 · The owner of a business recently purchased a new delivery vehicle and made the payments… 9706/11 Oct/Nov 2025

5 The owner of a business recently purchased a new delivery vehicle and made the payments shown. $ delivery vehicle 28000 fitting shelves in the vehicle 3000 painting business logo on the side of the vehicle 2000 What was the total capital expenditure? A $28000 B $30000 C $31000 D $33000 Which statements are correct?

1 marks

Answer: D

This question in 9706/11 Oct/Nov 2025

Q291 · Motor vehicles purchased for $530000, at the start of the year, have been incorrectly… 9706/11 Oct/Nov 2025

7 Motor vehicles purchased for $530000, at the start of the year, have been incorrectly depreciated for the whole year, using the straight-line method at 10% instead of 25%. Ledger balances after the entries have been posted are as follows: $ motor vehicles at cost 530000 provision for depreciation of motor vehicles 53000 Which entries will correct the error? account to be debited $ account to be credited $ A statement of profit 79500 provision for depreciation 79500 or loss of motor vehicles B statement of profit 132500 provision for depreciation 132500 or loss of motor vehicles C provision for depreciation 79500 statement of profit 79500 of motor vehicles or loss D provision for depreciation 132500 statement of profit 132500 of motor vehicles or loss

1 marks

Answer: A

This question in 9706/11 Oct/Nov 2025

Q292 · Vehicle X was purchased for $80000 9706/11 Oct/Nov 2025

8 Vehicle X was purchased for $80000. It had a useful life of five years and was expected to be sold for $5000 at the end of its useful life. Vehicles are depreciated using the straight-line method. Vehicle X is replaced by vehicle Y after three years of use. The cost of vehicle Y is partly settled by the part exchange value of $20000 of vehicle X. What is the loss on disposal of vehicle X? A $12000 B $15000 C $24000 D $30000

1 marks

Answer: B

This question in 9706/11 Oct/Nov 2025

Q293 · An item of capital expenditure has been treated as revenue expenditure 9706/12 Oct/Nov 2025

4 An item of capital expenditure has been treated as revenue expenditure. What is the effect on the non-current assets and on the loss for the year? non-current assets loss for the year A overstated overstated B overstated understated C understated overstated D understated understated

1 marks

Answer: C

This question in 9706/12 Oct/Nov 2025

Q294 · Y Limited purchased a motor van and incurred the following expenditure at the beginning… 9706/12 Oct/Nov 2025

5 Y Limited purchased a motor van and incurred the following expenditure at the beginning of the year. $ motor van 50000 delivery of motor van 4500 upgrading the engine 6000 2-year maintenance 4000 contract annual licence fee 1200 The motor van is to be depreciated at 20% using the straight-line method. What is the total amount of expenses to be included in the statement of profit or loss for the year? A $14340 B $15300 C $17300 D $20100

1 marks

Answer: B

This question in 9706/12 Oct/Nov 2025

Q295 · A business charges depreciation on its property using the straight-line method 9706/12 Oct/Nov 2025

6 A business charges depreciation on its property using the straight-line method. At the start of the year, the business revalued its property upwards with the useful life remaining unchanged. What is the change to the expenses and carrying value of the property at the end of the current year compared to the previous year? carrying value expenses of property A decrease decrease B decrease increase C increase decrease D increase increase

1 marks

Answer: D

This question in 9706/12 Oct/Nov 2025

Q296 · X Limited purchased a property for $100 000 on 1 January 2010 9706/12 Oct/Nov 2025

7 X Limited purchased a property for $100 000 on 1 January 2010. The property had an expected useful life of 50 years. On 1 January 2024, the property was revalued at $119000. The total estimated useful life still remained 50 years from 1 January 2010. What is the charge for depreciation for the year ended 31 December 2024? A $2000 B $2380 C $2778 D $3306

1 marks

Answer: D

This question in 9706/12 Oct/Nov 2025

Q297 · What are correct descriptions of revenue and capital expenditure? 9706/13 Oct/Nov 2025

5 What are correct descriptions of revenue and capital expenditure? 1 Capital expenditure includes the cost of improving non-current assets. 2 Capital expenditure includes the cost of purchasing non-current assets. 3 Revenue expenditure includes the everyday running costs of a business. A 1, 2 and 3 B 1 and 2 only C 1 and 3 only D 2 and 3 only

1 marks

Answer: A

This question in 9706/13 Oct/Nov 2025

Q298 · A business has a financial year end of 31 December 9706/13 Oct/Nov 2025

6 A business has a financial year end of 31 December. New production machinery was purchased on 1 July in the current financial year. The business depreciates production machinery using the straight-line method at a rate of 20% per annum. Depreciation is charged for each month of ownership. The residual value of the new production machinery has been estimated at $20 000. Depreciation charged on the new production machinery was $8000 for the current financial year. What was the cost of the new production machinery? A $40 000 B $60 000 C $80 000 D $100 000

1 marks

Answer: D

This question in 9706/13 Oct/Nov 2025

Q299 · A new business is deciding upon the methods to use for calculating depreciation on… 9706/13 Oct/Nov 2025

7 A new business is deciding upon the methods to use for calculating depreciation on non-current assets. Which statements are correct? 1 Reducing balance method is used when a non-current asset is expected to lose more of its value early in its life. 2 Straight-line method is used for depreciating both land and buildings. 3 Straight-line method is used when the most benefit is gained from a non-current asset in the early years of its life. A 1 and 2 B 1 only C 2 only D 2 and 3

1 marks

Answer: B

This question in 9706/13 Oct/Nov 2025

Q300 · A company has two non-current assets 9706/13 Oct/Nov 2025

8 A company has two non-current assets. Details are as follows: cost residual asset date purchased depreciation method $ value X 1 Jan 2023 10000 straight-line life 5 years $2000 Y 1 Jan 2023 20000 reducing balance rate 20% nil What was the total depreciation charge in the statement of profit or loss for the year ended 31 December 2024? A $4800 B $5200 C $5600 D $6000

1 marks

Answer: A

This question in 9706/13 Oct/Nov 2025