# 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

### 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

 PARTICULARS AMOUNT Cost of asset in year 1 100000 Less Depreciation@25% 25000 Book value at the end of year 1 75000 Book value at the beginning of year 2 75000 Less Depreciation@25% 25000 Book value at the end of year 2 50000 Book value at the beginning of year 3 50000 Less Depreciation@25% 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

### 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