CIE Accounting Paper-2: Specimen Questions 17 - 19 of 103

Passage

Mr. Jack purchases machinery at a cost of £100000. The life of the machinery is said to be 3 years At the end of 3 years the machinery is sold as scrap at £20000.

Question number: 17 (2 of 5 Based on Passage) Show Passage

Short Answer Question▾

Write in Short

Calculate the profit or loss of Mr. Jack if he depreciates the machinery on Straight line method assuming the percentage of depreciation is 25%

Explanation

Loss of £5000

Deprecation in the books of Mr. Jack on the basis of Straight line method

shows Deprecation in the books of Mr. Jack on the basis of Straight line method

PARTICULARS

AMOUNT

Cost of asset in year 1

100000

Less [email protected]%

25000

Book value at the end of year 1

75000

Book value at the beginning of year 2

75000

Less [email protected]%

25000

Book value at the end of year 2

50000

Book value at the beginning of year 3

50000

Less [email protected]%

25000

Book value at the end of year 3

25000

Scrap value

20000

Loss = Book Value - Scrap Value

-5000

Question number: 18 (3 of 5 Based on Passage) Show Passage

Short Answer Question▾

Write in Short

What are the methods available to Mr. Jack to calculate depreciation on the machinery?

Explanation

Mr. Jack can use any of the two widely used methods to calculate depreciation on his machinery. The methods are:

(i) Straight Line Method

(ii) Written down value Method

Question number: 19 (4 of 5 Based on Passage) Show Passage

Short Answer Question▾

Write in Short

How will Mr. Jack ascertain the percentage of written down value on the machinery?

Explanation

Mr. Jack can ascertain the percentage of written down value using the formula

R=NRVCOST

Where R = Percentage rate, N = Years, RV = Residual/Scrap value

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