# IGCSE Accounting Paper-1: Specimen Questions with Answers 122 - 125 of 214

## Passage

Mosses started a business on 1 December 2015 printing designs on Sarees and bought a printing machine for \$32000.

He decided to depreciate the printing machine on the straight line basis over 10 years and expected the machine to have a scrap value of \$7000 after that time.

## Question number: 122 (1 of 5 Based on Passage) Show Passage

Edit

### Write in Short

Calculate the Value of asset at the end of 2017 if Mosses adopted the straight line value method.

### Explanation

\$27000

The value of depreciation will not change under the written down value method. Hence

Cost of printing Machinery

Less: Depreciation on 2016 \$2500

________

29500

Less: Depreciation on 2017 \$2500

________

\$27000

## Question number: 123 (2 of 5 Based on Passage) Show Passage

Edit

### Write in Short

Give one reason why depreciation on fixed assets are shown in an income and statement.

### Explanation

The primary objectives are as follows:

• To ascertain of true profit
• Presentation of true financial position of the firm.
• No distortion of divisible profits.

The value of an asset may get exhausted due to it over usage. The reduction in the asset should be provided from the income in order to calculate the true and real income of the business. Thus depreciation on fixed assets is shown in the profit and loss accounts.

## Question number: 124 (3 of 5 Based on Passage) Show Passage

Edit

### Write in Short

Calculate the depreciation charged in Mosses’s profit and loss account for the year ended 2016.

### Explanation

\$2500

Depreciation is charged as

## Question number: 125 (4 of 5 Based on Passage) Show Passage

Edit

### Write in Short

Mosses bought the new machine at the end of 2017 and sold the existing machine for scrap for \$4000.

Prepare the Disposal of non-current (fixed) assets account in Mosses’s ledger account.

Disposal of machinery account

### Explanation

Disposal of machinery account

 Date Particulars \$ Date Particular \$ October 12 32000 October 15 Depreciation 5000 Bank 4000 Profit/loss account 23000

On sale of fixed asset an’ asset disposal account’ may be opened in order to ascertain the profit and loss incurred during the sale of old fixed assets. It is usually opened with the cost value of assets.