An item of plant and equipment cost £15,000 at the start of Year 3. Its estimated residual value is £3,000 and it has an estimated useful life of 4 years. It is sold at the end of Year 4 for £7,000. A full year's depreciation is charged in the year of acquisition and in the year of disposal. Which of the following is correct? a) The depreciation on a straight-line basis is £3,750 per annum; the loss on disposal at the end of Year 4 is £500 Ob) The depreciation on a straight-line basis is £3,750 per annum; the gain on disposal at the end of Year 4 is £500 O c) The depreciation on a straight-line basis is £3,000 per annum; the loss on disposal at the end of Year 4 is £2,000 O d) The depreciation on a straight-line basis is £3,000 per annum; the gain on disposal at the end of Year 4 is £2,000

An item of plant and equipment cost £15,000 at the start of Year 3. Its estimated residual value is £3,000 and it has an estimated useful life of 4 years. It is sold at the end of Year 4 for £7,000. A full year's depreciation is charged in the year of acquisition and in the year of disposal. Which of the following is correct? a) The depreciation on a straight-line basis is £3,750 per annum; the loss on disposal at the end of Year 4 is £500 Ob) The depreciation on a straight-line basis is £3,750 per annum; the gain on disposal at the end of Year 4 is £500 O c) The depreciation on a straight-line basis is £3,000 per annum; the loss on disposal at the end of Year 4 is £2,000 O d) The depreciation on a straight-line basis is £3,000 per annum; the gain on disposal at the end of Year 4 is £2,000

Name: An item of plant and equipment cost £15,000 at the start of Year 3. I
Uploaded: 2024-03-05T11:50:36.000Z
Channel: Bartleby
Description: An item of plant and equipment cost £15,000 at the start of Year 3. Itsestimated residual value is £3,000 and it has an estimated useful life of 4years. It is sold at the end of Year 4 for £7,000. A full year's depreciation ischarged in the year of

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Q: The MACRS depreciation allowances on 3-year property are 33.33%, 44.45%, 14.81%, and 7.41%,…

A: Depreciation A method of allocation of net cost with respect to those periods in which an entity is…

Q: Vasquez Development Partners purchased new construction equipment for $430,000 at the beginning of…

A: Depreciation is considered as an expense charge on the value of the Asset. It can be calculated by…

Q: An asset is purchased for $200,000. The salvage value in 20 years is $75,000. What is the…

A: Cost of non-current assets is amortized throughout its useful life and is recorded as depreciation…

Q: The price of a system of jockey pumps is P5,500,000. PLM decided to purchase this system and spent…

A: Depreciation means the loss in value of assets because of usage of assets , passage of time or…

Q: JK Builders Co purchases a new excavator costing £40,000. Its expected useful life is ten years, at…

A: FORMULA OF DEPRECIATION UNDER STRAIGHT LINE METHOD = (COST OF ASSETS- RESIDUAL VALUE)/ESTIMATED LIFE…

Q: Angels Inc. purchases a piece of equipment for $65,000. The equipment has an expected useful life of…

A: Depreciation: Depreciation means the reduction in the value of an asset over the life of the assets…

Q: A company purchases

A: Depreciation is a measure of the wearing out, consumption or other loss of value of a depreciable…

Q: A depreciable property costing 1,400,000 with original residual value of 80,000 after 10 years, had…

A: Revaluation Surplus = Fair value - Carrying Amount Depreciation Expense = Cost - Residual…

Q: An asset was purchased for $77,000 and originally estimated to have a useful life of 10 years with a…

A: Answer a) Computation of depreciation as per Straight line method is = (Cost of an asset - Residual…

Q: What is the depreciation deduction each year, using each of the methods below, for an asset that…

A: Depreciation is the reduction in the value of assets due to normal wear and tear, passage of time,…

Q: A property is purchased at 1M and is expected to last 10 years with a salvage value of P100,000.…

A: Initial Cost = P 1,000,000 Salvage value = P100,000. Time Period = 10 Years

Q: For a vehicle that cost £40,000, had an estimated useful life of four years and an estimated scrap…

A: Depreciation is the amount which is to be reduced from value of assets to recognise the normal…

Q: The cost of an asset is $1,050,000, and its residual value is $280,000. Estimated useful life of the…

A: Depreciation means the amount expense out of cost of assets due to normal usage of assets , normal…

Q: 5. The price of a system of jockey pumps is P5,500,000. PLM decided to purchase this system and…

A: To calculate the straight-line depreciation rate for your asset, simply subtract the salvage value…

Q: An asset costs $260,000 and is classified as a ten-year asset. What is the annual depreciation…

A: As per the table of MACRS depreciation, the depreciation rates for the three years with respect to…

Concept explainers

Depreciation Methods

The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.

Depreciation Accounting

In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.

Topic Video

Question

An item of plant and equipment cost £15,000 at the start of Year 3. Its
estimated residual value is £3,000 and it has an estimated useful life of 4
years. It is sold at the end of Year 4 for £7,000. A full year's depreciation is
charged in the year of acquisition and in the year of disposal. Which of the
following is correct?
a) The depreciation on a straight-line basis is £3,750 per annum; the
loss on disposal at the end of Year 4 is £500
b) The depreciation on a straight-line basis is £3,750 per annum; the
gain on disposal at the end of Year 4 is £500
c) The depreciation on a straight-line basis is £3,000 per annum; the
loss on disposal at the end of Year 4 is £2,000
d) The depreciation on a straight-line basis is £3,000 per annum; the
gain on disposal at the end of Year 4 is £2,000

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step 3

VIEW

Step by step

Solved in 3 steps with 2 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

A business buys a machine for £60,000 and depreciates it at 10% per annum by the reducing instalment method. What is the depreciation charge for the second year of the machine’s use? A £4,800 B £4,860 C £5,400 D £6,000
An equipment costing P250,000 has an estimated life of 15 years with a book value of P30,000 at the end of the period. Compute the depreciation charge and its book value after 10 years using straight-line method.
Given a cost of a depreciable fixed asset of $24,000 with a salvage value of $2,000 and a life of 5 years, what is the annual depreciation of the fixed asset using the straight-line method? What would be the depreciation in the second year if it used the declining balance method at double the straight-line rate? In regards to question #1, if the company used the straight-line method and sold the asset after 4 years for $7,000, what would be the journal entry needed to record the transaction? What if they sold it for $5,000?
An asset with a cost of £250,000 and no salvage value were originally depreciated on a straight-line basis for the first 7 years of its 25-year useful life, the book value of the asset at the end of year 7 would be £180,000 (£250,000 – £70,000). If the estimated useful life was revised at the end of year 7, and the asset was assumed to have a remaining useful life of 9 years, the following journal entry would be made for depreciation at the end of year 8: O a. Debit: Depreciation Expense 10,000 Credit: Accumulated Depreciation 10,000 O b. None of these C. Debit: Depreciation Expense 20,000 Credit: Accumulated Depreciation 20,00O Od. Debit: Accumulated Depreciation 20,000 Credit: Depreciation Expense 20,000
A machine can be purchased for $50,000 and used for five years, yielding the following income. This income computation includes annual depreciation expense of $10,000. Income Year Year 1 $3,300 Initial invest Year 1 Year 2 Year 3 Year 4 Year 5 Year 2 $8,300 Compute the machine's payback period. Note: Round payback period answer to 2 decimal places. Net Income Depreciation 3,300 8,300 30,000 12,400 33,200 Year 3 $30,000 Year 4 $12,400 Net Cash Flow $ (50,000) $ Payback period = Year 5 $33,200 Cumulative Net Cash Flow (50,000) 0 0
An equipment costing P220,000 has an estimated life of 14 years with a book value of P30,000 at the end of the period. Compute the depreciation charge and its book value after 10 years using: a. straight-line method b. sinking fund method c. declining balance method d. sum of year's digit method
ABC’s property originally cost £300,000. After 10 years use it was revalued by £200,000. This building is depreciated at 2% per annum. Calculate annual depreciation charges following the revaluation.
An asset costs $290,000 and is classified as a ten-year asset. What is the annual depreciation expense for the first three years under the straight-line and the modified accelerated cost recovery systems of depreciation? Be sure to apply the half-year convention to straight-line depreciation. Use Exhibit 9.4 to answer the question. Round your answers to the nearest dollar. Straight-line depreciation: Year Depreciation expense 1 $ 2 $ 3 $ Accelerated cost recovery system of depreciation: Year Depreciation expense 1 $ 2 $ 3 $
s
Tory Enterprises pays $254,400 for equipment that will last five years and have a $45,200 salvage value. By using the equipment in its operations for five years, the company expects to earn $90,100 annually, after deducting all expenses except depreciation. Prepare a table showing income before depreciation, depreciation expense, and net (pretax) income for each year and for the total five-year period, assuming straight-line depreciation is used.