IGCSE Accounting Paper-1: Specimen Questions with Answers 291 - 292 of 338

Passage

Anand depreciates his furniture using the straight line method of depreciation. He provides a full year depreciation in the year of purchase and none in the year of disposal. He provided the following information:

furniture using the straight line method of depreciationfurniture using the straight line method of depreciation

Furniture

Cost

$

Accumulated Depreciation

$

At 31 Dec 2016

55000

11000

At 31 Dec 2017

55000

16500

There were no new purchase or disposal during the year ended 31 Dec 2017.

Question number: 291 (5 of 5 Based on Passage) Show Passage

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One Liner Question▾

Write in Brief

State the necessary double entry to record the depreciation charge for the year ended 31 December 2018. (Marks 2)

Explanation

State the necessary double entry to record the depreciation charge State the necessary double entry to record the depreciation charge

Date

Dr

$

Cr

$

2018

Dec 31

Income Statement

7000

Provision for depreciation on

Furniture A/c

7000

Question number: 292

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MCQ▾

Question

ABC Ltd. bought a building at a cost of $2,00,000 in 2010, the fair market value of which stands at $4,50,000 on 31 December 2019. ABC Ltd. shows the building at $4,50,000 in his balance sheet on 31 December 2019. Which accounting principle is violated here?

Choices

Choice (4)Response

a.

Going Concern Principle

b.

Conservatism Principle

c.

Cost Principle

d.

Realization Principle

Answer

c.

Explanation

  • Cost Principle says that the fixed assets of a business should always be recorded at their original cost regardless of their current market price. The original cost is the amount actually paid for its acquisition.

  • The building in this case should be shown at the price paid by ABC Ltd. to acquire it i. e. at $2,00,000.

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