Answered: accounting principle

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Joseph bought a second-hand delivery van for £8,595. A brand new delivery van costs £12,400 at UK Motors, however, another agent is offering the same delivery van for 11,300. The purchased delivery van is to be depreciated using the straight-line method with the resale value of £300 and an estimated life of 7 years. Required: a. At what amount should the delivery van be recorded? Discuss the accounting principle that needs to be applied in recording this non-current asset. ________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________ b. Calculate the depreciation of the delivery van. Explain the accounting principle to be applied in depreciating this non-current asset. ________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________ c. Is the business allowed to change the depreciation method in order to present a higher income? Discuss the accounting principle that the business will follow when using the depreciation methods. ____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

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Section 179 Deduction and Modified Accelerated Cost Recovery System (MACRS) Depreciation

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