Accounting for depreciation and disposal of non-current assets — Paper 1 · IGCSE Accounting (9-1) 0985

15 A non-current asset was depreciated at the end of the first year of ownership using the straight-line method based on the following information. cost $20 000 working life 4 years residual value $4000 It was then found that the reducing balance method at 30% per annum should have been used. What was the effect on the profit for the year of correcting this error? A decrease by $2000 B increase by $2000 C decrease by $6000 D increase by $6000

1 marks

Answer: A

This question in 0985/11 May/June 2020

35 Brad purchased a machine for $1000 on 1 January 2019. The machine was expected to last for four years and have no residual value. On 31 December 2019 the same machine cost $1200 to purchase. At which value should the machine be included in the statement of financial position on 31 December 2019? A current cost with no depreciation B current cost with one year’s depreciation C original purchase price with no depreciation D original purchase price with one year’s depreciation

1 marks

Answer: D

This question in 0985/11 May/June 2020

16 A non-current asset was depreciated at the end of the first year of ownership using the straight-line method based on the following information. cost $20 000 working life 4 years residual value $4000 It was then found that the reducing balance method at 30% per annum should have been used. What was the effect on the profit for the year of correcting this error? A decrease by $2000 B increase by $2000 C decrease by $6000 D increase by $6000

1 marks

Answer: A

This question in 0985/12 May/June 2020

17 Elzevir purchased a motor vehicle costing $8000 on 1 January 2018. It is depreciated at 40% on the reducing balance basis. Which journal entry records the depreciation for the year ended 31 December 2019? debit credit A income statement 1920 provision for depreciation of motor vehicles 1920 B income statement 3200 provision for depreciation of motor vehicles 3200 C provision for depreciation of motor vehicles 1920 motor vehicles 1920 D provision for depreciation of motor vehicles 3200 motor vehicles 3200

1 marks

Answer: A

This question in 0985/12 May/June 2020

16 Rashid provided the following information at 31 December. $ machinery at cost 52 000 provision for depreciation of machinery 23 000 Depreciation for the year is calculated at 20% on cost. After the statement of financial position was prepared it was found that the machinery repairs costing $2000 had been debited to the machinery account. What is the correct balance on the provision for the depreciation of machinery account? A $21 000 B $22 600 C $23 400 D $25 000

1 marks

Answer: B

This question in 0985/12 Oct/Nov 2020

17 A machine which cost $32 000 was sold for $14 000. The total depreciation at the date of disposal was $15 000. What was the profit or loss on disposal? A $3000 profit B $3000 loss C $18 000 profit D $18 000 loss

1 marks

Answer: B

This question in 0985/12 Oct/Nov 2020

11 What is the effect of treating an item of capital expenditure as revenue expenditure? 1 Cost of non-current assets is overstated. 2 Cost of non-current assets is understated. 3 Depreciation for the year is overstated. 4 Depreciation for the year is understated. A 1 and 3 B 1 and 4 C 2 and 3 D 2 and 4

1 marks

Answer: D

This question in 0985/11 May/June 2021

12 Why does a business provide for depreciation on non-current assets? A to charge the cost of non-current assets against profit in the year of purchase B to ensure that non-current assets appear at book value in the statement of financial position C to ensure that the matching principle is applied when preparing financial statements D to retain cash in the business for replacement of non-current assets

1 marks

Answer: C

This question in 0985/11 May/June 2021

13 Machinery which had cost $6290 was sold for $3100. The disposal account showed a profit on disposal of $584. How much was the depreciation up to the date of disposal and on which side of the disposal account was it recorded? A $2606 on the credit side B $2606 on the debit side C $3774 on the credit side D $3774 on the debit side

1 marks

Answer: C

This question in 0985/11 May/June 2021

17 Why does a business provide for depreciation on non-current assets? A to charge the cost of non-current assets against profit in the year of purchase B to ensure that non-current assets appear at book value in the statement of financial position C to ensure that the matching principle is applied when preparing financial statements D to retain cash in the business for replacement of non-current assets

1 marks

Answer: C

This question in 0985/12 May/June 2021

18 A machine with an original cost of $10 000 had been depreciated for two years at the rate of 10% per annum using the straight-line basis. It was then sold for cash with the loss on disposal amounting to $700. A replacement machine was bought on the same day for $12 400 cash. What was the net decrease in the cash balance? A $3700 B $5100 C $11 700 D $13 100

1 marks

Answer: B

This question in 0985/12 May/June 2021

14 Two companies each purchased a motor vehicle for $10 000 at the beginning of year 1. Company G used the straight-line method of depreciation at a rate of 15% per annum, while Company H used the reducing balance method at a rate of 20% per annum. What was the difference in the depreciation charge between the two companies for year 2? A $100 greater for G B $100 greater for H C $500 greater for G D $500 greater for H

1 marks

Answer: B

This question in 0985/12 Oct/Nov 2021

15 On 1 January, Zac entered the cost of repairing equipment, $420, in the equipment account. On 31 December, depreciation of 20% per annum, using the straight-line method, was charged on the balance of the equipment account. What was the overall effect on the book value of the equipment on 31 December? A $84 understated B $336 overstated C $420 overstated D $504 understated

1 marks

Answer: B

This question in 0985/11 May/June 2022

16 Atif depreciates his motor vehicles at a rate of 20% per annum using the reducing balance method. On 1 May 2021, Atif owned motor vehicles which cost $35 000. At that date, the motor vehicles had been depreciated by $12 600. What was the balance on Atif’s provision for depreciation account on 1 May 2022? A $17 080 B $17 920 C $19 600 D $22 400

1 marks

Answer: A

This question in 0985/11 May/June 2022

17 The financial year of Yeung ends on 31 March. On 1 April 2021, he purchased a machine for $4000. He estimated that it would have a useful working life of 3 years and a residual value of $100. Yeung uses the straight-line method of depreciation. The machine was sold on 1 April 2022 for $1500. What was the loss on disposal? A $1100 B $1200 C $2400 D $2500

1 marks

Answer: B

This question in 0985/11 May/June 2022

12 Which statement about the reducing balance method of depreciation is not correct? A A lower amount of depreciation is charged in the early years of the asset’s life than in the later years. B Each year a given percentage is deducted from the cost of the asset less the depreciation to date. C It is used for assets which give greater benefits in the early years of their life. D The net book value of the non-current asset will never reach a nil value.

1 marks

Answer: A

This question in 0985/12 May/June 2022

13 The financial year of Yeung ends on 31 March. On 1 April 2021, he purchased a machine for $4000. He estimated that it would have a useful working life of 3 years and a residual value of $100. Yeung uses the straight-line method of depreciation. The machine was sold on 1 April 2022 for $1500. What was the loss on disposal? A $1100 B $1200 C $2400 D $2500

1 marks

Answer: B

This question in 0985/12 May/June 2022

13 Wentile purchased a motor vehicle for $35 000. He estimated it would be used for five years and then sold for $5000. Wentile depreciated the motor vehicle using the straight-line method at a rate of 20% per annum. What was the accumulated depreciation on this motor vehicle at the end of year 2? A $10 800 B $12 000 C $12 600 D $14 000

1 marks

Answer: B

This question in 0985/12 Oct/Nov 2022

14 On the first day of his financial year, Jason purchased a new machine costing $20 000. On that date his old machine had a book value of $6000. Jason was allowed $4500 for the old machine in part exchange. He paid the balance by cheque. Machinery is depreciated at 20% per annum. How much should be charged to Jason's income statement for the year? A $1500 B $2500 C $4000 D $5500

1 marks

Answer: D

This question in 0985/12 Oct/Nov 2022

16 Which statement about depreciation is correct? A It is a cash fund to replace a non-current asset. B It is a monetary expense as it involves the outflow of money. C It is an estimate of the loss in value of a current asset over its expected life. D It is recorded in the nominal ledger and the income statement.

1 marks

Answer: D

This question in 0985/11 May/June 2023

17 Rashid provided the following balances at 31 December. $ machinery at cost 52 000 provision for depreciation of machinery 23 000 Depreciation for the year was calculated at 20% on cost and is included in the balance for the provision. After the balances had been extracted, it was found that machinery repairs costing $2000 had been debited in error to the machinery account. What is the correct balance on the provision for the depreciation of machinery account? A $21 000 B $22 600 C $23 400 D $25 000

1 marks

Answer: B

This question in 0985/11 May/June 2023

10 Maya depreciates her motor vehicle at 25% per annum using the straight-line method. The motor vehicle cost $15 000. The depreciation for the current financial year was incorrectly calculated at 15% per annum. How will correcting the error affect the profit for the year? A decrease $1500 B decrease $2250 C increase $1500 D increase $2250

1 marks

Answer: A

This question in 0985/12 May/June 2023

16 A business bought two assets, X and Y, on 1 January 2022, for $2000 each. It depreciates asset X by 10% per annum using the straight-line method, and asset Y by 10% per annum using the reducing balance method. Which statements are correct? asset X will be fully in 2022 the depreciation depreciated before charge is lower for asset Y asset X than for asset Y A incorrect incorrect B incorrect correct C correct incorrect D correct correct

1 marks

Answer: C

This question in 0985/12 May/June 2023

17 Ravi’s financial year ends on 30 April. Ravi bought a motor vehicle for $8000 on 1 May 2020 and sold it for $4050 on 1 May 2022. He uses the reducing balance method of depreciation at 20% per annum. What would be recorded in the income statement for the year ended 30 April 2023 for the disposal of the motor vehicle? A $750 loss B $750 profit C $1070 loss D $1070 profit

1 marks

Answer: C

This question in 0985/12 May/June 2023

16 Why are non-current assets depreciated? 1 to avoid overstating the value of non-current assets 2 to charge the cost of an asset as an expense over its lifetime 3 to comply with the accounting principle of historic cost 4 to match capital expenditure against the income it has helped earn A 1, 2 and 4 B 1, 3 and 4 C 1 and 3 only D 2 and 3

1 marks

Answer: A

This question in 0985/12 Oct/Nov 2023

17 On 1 January, Raheem purchased equipment costing $850. It was estimated to have a working life of 5 years and a scrap value of $50. The asset was depreciated using the straight-line method. At the end of 3 years, the machine was sold for $100. What was the profit or loss on disposal? A $240 loss B $270 loss C $50 profit D $220 profit

1 marks

Answer: B

This question in 0985/12 Oct/Nov 2023

16 Mandeep depreciates his motor vehicles at the rate of 20% using the straight-line method. A full year’s depreciation is provided in the year of purchase. Mandeep bought a motor vehicle on 1 January 2017 for $20000. On 1 June 2020 he bought a second motor vehicle for $10000. What was the depreciation charge on motor vehicles for the year ended 31 December 2020? A $2000 B $4000 C $5000 D $6000

1 marks

Answer: D

This question in 0985/11 May/June 2024

15 Elzevir purchased a motor vehicle costing $8000 on 1 January 2018. It is depreciated at 40% on the reducing balance basis. Which journal entry records the depreciation for the year ended 31 December 2019? debit credit $ $ A income statement 1920 provision for depreciation of motor vehicles 1920 B income statement 3200 provision for depreciation of motor vehicles 3200 C provision for depreciation of motor vehicles 1920 motor vehicles 1920 D provision for depreciation of motor vehicles 3200 motor vehicles 3200

1 marks

Answer: A

This question in 0985/12 May/June 2024

16 A trader sold one of his vehicles. What is the journal entry to remove the total depreciation on the vehicle sold? account debited account credited A disposal of motor vehicles provision for depreciation of motor vehicles B income statement disposal of motor vehicles C provision for depreciation of motor motor vehicles vehicles D provision for depreciation of motor disposal of motor vehicles vehicles

1 marks

Answer: D

This question in 0985/12 May/June 2024

15 Which statements are correct about depreciation? 1 It is a non-cash expense item. 2 It is an estimated amount. 3 It is the amount of money set aside to replace a non-current asset. 4 It is a gradual loss in the value of a current asset. A 1, 2 and 3 B 1 and 2 only C 2, 3 and 4 D 2 and 4 only

1 marks

Answer: B

This question in 0985/12 Oct/Nov 2024

16 A machine with an original cost of $10000 had been depreciated for two years at the rate of 10% per annum using the straight-line method. It was then sold for cash with the loss on disposal amounting to $700. A replacement machine was bought on the same day for $12400 cash. What was the net decrease in the cash balance? A $3700 B $5100 C $11700 D $13100

1 marks

Answer: B

This question in 0985/12 Oct/Nov 2024

15 Atif depreciates his motor vehicles at a rate of 20% per annum, using the reducing balance method. On 1 May 2024, Atif owned motor vehicles which had cost $35 000. The accumulated depreciation on these motor vehicles was $12 600 on 1 May 2024. What will be the balance on Atif’s provision for depreciation account on 30 April 2025? A $17 080 B $17 920 C $22 400 D $26 880

1 marks

Answer: A

This question in 0985/11 May/June 2025

15 On 1 January 2023, equipment was purchased for $50000. The equipment is expected to have a useful life of five years and a residual value of $10000. The straight-line method of depreciation is used. What was the balance on the provision for depreciation of equipment account on 31 December 2024? A $8000 B $10000 C $16000 D $20000

1 marks

Answer: C

This question in 0985/12 May/June 2025