United Ltd purchases a company car for £198,000 plus VAT at 17.5%. The car is expected to have a life of three years and a residual value of £90,000. Payment is made partly in cash and partly by trading in an old car with a net book value of £70,560 and a trade-in value of £54,000. The company uses the straight-line basis to depreciate its cars. What is the net book value of the car after one year? A £150,000 B £156,000 C £162,000 D £185,100

United Ltd purchases a company car for £198,000 plus VAT at 17.5%. The car is expected to have a life of three years and a residual value of £90,000. Payment is made partly in cash and partly by trading in an old car with a net book value of £70,560 and a trade-in value of £54,000. The company uses the straight-line basis to depreciate its cars. What is the net book value of the car after one year? A £150,000 B £156,000 C £162,000 D £185,100

CONCEPTS IN FED.TAX.,2020-W/ACCESS

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter11: Property Dispositions

Section: Chapter Questions

Problem 64P

See similar textbooks

Related questions

Q: A company provides each of its directors with a car. It has purchased these at £35,000 each. After 4…

A: Depreciation is the amount of expense which shows the decrease in the value of asset over time by…

Q: The estimated useful life of the machine is five years, after which time the residual value is…

A: The right answer is option c.36,000

Q: Justice Inc. sold its old equipment with original cost of 2,000,000 and accumulated depreciation of…

A: When the asset is sold at a price higher than its book value, it is said to be sold at a profit.

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: Willis Company trades in a printing press for a newer model. The cost of the old printing press was…

A: This is a case of asset exchange, and exchanges having commercial substance are recorded at fair…

Q: Gilly Construction trades in an old tractor for a new tractor, receiving a $29,000 trade-in…

Q: At the beginning of the year Joeker Company brought machinery under a contract that required a down…

A: Interest is paid on the loan amount sanctioned. Interest amount is said to be the cost of the funds…

Q: Mirabel Company has an old equipment that cost P700,000 with an accumulated depreciation of…

A: In case of exchange of equipments having commercial substance, equipment sold and equipment acquired…

Q: Brown Company contracts with Sebastian Company to exchange refrigerated trucks. Brown Company will…

A: An exchange is said to have commercial substance if the risk, timing and amount of cash flows…

Q: Wanda sold an asset for £10,000. The original cost was £23,000. The asset, which had an estimated…

A: The profit or loss from the disposal of the asset represents the difference between sale amount of…

Q: Wake Coffee Co. has a piece of equipment no longer needed for production. The company purchased the…

A: Introduction:- A piece of machinery at Wake Coffee Co. is no more in use. The machinery was…

Q: Your firm bought a machine for £5,000 on 1 January 20X1, when it had a useful life of four years and…

A: Depreciation is the allocation of cost of asset over the useful life of the asset. Under straight…

Q: Northern Inc. purchases an asset for $150,000. This asset qualifies as a five−year recovery asset…

A: Solution:- Calculation of cash flow from disposal as follows under:-

Q: Opal, Inc. owns a delivery truck that initially cost $40,000. After a depreciation of $15,000 had…

A: Assets means the resources which is owned by business. Liability means the amount which is to be…

Q: On 1 January 2021, Tymba plc has a building with a carrying value of £500,000 which was purchased on…

A: As per IAS 16, Property, Plant and Equipment Amount that can be transferred from revaluation…

Q: During the current year, Adrienne Company purchased a second hand machine at a price of P5,000,000.…

A: Capitalized cost is the one which is computed over a certain period of time, starting from the…

Q: Reason Inc. sold its old equipment with original cost of P2,000,000 and accumulated depreciation of…

A: Solution Working note Carrying amount of equipment = original cost - accumulated depreciation. =…

Q: P400,000. Compute the gain or loss from disposal of Vehicle. (Use negative sign if your answer is…

A: Trade-in allowance It is the reduction in the trade value of an asset offered for sale by the…

Q: Gene’s business bought a machine for £72,000 on 1 January 2000 and another one for £96,000 on 1st…

A: We have the following information: Machine 1Date of Purchase: January 1, 2000Cost: $72,000 Machine…

Q: In October, Dean Company exchanged an old packing machine costing P240,000 and 50% depreciated, for…

A: Whenever a property is sold more than its carrying amount or value, a profit or gain on the sale of…

Q: Colquhoun International purchases a warehouse for $301,000. The best estimate of the salvage value…

A: Depreciation under straight line method = (Cost- salvage value)/useful life

Q: BTS Company has some old equipment that cost P700,000 with an accumulated depreciation of P400,000.…

A: List price (i.e., P 800,000) is the price listed on the machine. The initial cost of machine will be…

Q: Llungby AB spent 1,000,000 krone in 2017 on the development of a new product. The company determined…

A: A journal entry is a form of accounting entry that is used to report a business transaction in a…

Q: Cliff Company traded in an old truck for a new one. The old truck had a cost of $300,000 and…

A: Recorded value of new Truck = Fair value of the new Truck received where, Fair value of the new…

Q: On March 1, 2019, Extreme Company exchanged an old machine having a cost of and accumulated…

A: The non cash assets acquired in exchange process is recorded at fair market value in the accounting…

Q: Rahara Ltd purchased a piece of equipment for £600,000 on the Ist January 2021. The equipment is…

A: The question is related to Government Grant. Two methods of presentation in financial statements of…

Q: delivery truck for RM45,000. Additional fitting for the truck costs RM2,500. The truck is expected…

A: Value of equipment decrease with time because of use of equipment and wear and tear of equipment…

Q: During the current year, Benguet Company purchased a secondhand machine at a price of P300,000. A…

A: The cost which is incurred to bring the machine into a working form will be capitalized

Q: John Morse Corporation buys a van for $16,000. The estimated life of the van is four years. The…

A: Given information Cost of the van $16000 Useful life 4 years Residual value $4000 Sale value $8000…

Q: What should be the journal entry to record the disposal of the equipment?

A: As per IAS 39 ( Financial Instruments - Recognition and Measurement ) Financial assets has to be…

Q: A company provides each of its directors with a car. It has purchased these at £35,000 each. After 4…

A: Depreciation expense: Depreciation expense is the reduction in a particular asset due to its use or…

Concept explainers

Consolidation

Consolidation in general examination implies an asset oscillating between well-defined methods of trading status. Consolidation is commonly known as market indecisiveness, which completes when the asset's values move forward or backward the trading structure.

Question

United Ltd purchases a company car for £198,000 plus VAT at 17.5%. The car is

expected to have a life of three years and a residual value of £90,000. Payment is made

partly in cash and partly by trading in an old car with a net book value of £70,560 and

a trade-in value of £54,000. The company uses the straight-line basis to depreciate its

cars. What is the net book value of the car after one year?

A £150,000

B £156,000

C £162,000

D £185,100

Definition Video Definition Accounting method wherein the cost of a tangible asset is spread over the asset's useful life. Depreciation usually denotes how much of the asset's value has been used up and is usually considered an operating expense. Depreciation occurs through normal wear and tear, obsolescence, accidents, etc. Video

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 by step

Solved in 2 steps

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

Popeye Corporation traded in a vehicle for a new one priced at P740,000, receiving a trade-in allowance of P225,000 and paying the balance in cash. The old vehicle cost P600,000 and had accumulated depreciation of P400,000. Compute the gain or loss from disposal of Vehicle. (Use negative sign if your answer is loss)
On 1 January 2021, Tymba plc has a building with a carrying value of £500,000 which was purchased on 31 December 2010. The company use revaluation model to subsequently measure the building. Depreciation is charged based on straight line method over 50 years. The building were revalued on 30 May 2021 and it had a fair value of £650,000. Tymba plc makes an annual transfer between the revaluation reserves and retained earnings in accordance with best practice. What is the amount of annual transfer on 31 December 2021?
In October, Dean Company exchanged an old packing machine costing P240,000 and 50% depreciated, for a dissimilar used machine and paid a cash difference of P32,000. The market value of the old packaging machine was determined to be P140,000. How much is the cost of the newly acquired machine and the amount of gain or loss, respectively, that Dean should record on this exchange?
Rahara Ltd purchased a piece of equipment for £600,000 on the 1st January 2021. The equipment is expected to have an economic life of 5 years and will have no residual value. Depreciation is calculated on a straight-line basis over the life of the asset. The company received a government of £200,000 towards the purchase of the equipment. The financial year end of the company is December 31st each year. Required: Show the relevant extracts from the financial statements for the years ended 31/12/21 & 31/12/22 under each of the two allowable methods of presentation.
Wanda sold an asset for £10,000. The original cost was £23,000. The asset, which had an estimated residual value of £6,000, had a net book value at the time of sale of £9,000. What was the profit or loss on disposal? a) £1,000 lossb) £4,000 profitc) £1,000 profitd) £4,000 loss
Willis Company trades in a printing press for a newer model. The cost of the old printing press was $62,000, and accumulated depreciation up to the date of the trade - in is $46,000. The company also pays $45,000 cash for the newer printing press. The fair market value of the newer printing press is $70,000. The journal entry to acquire the new printing press will required a debit to Printing Press for: A. $45,000 B. $108,000. C. $70,000. D. $62,000
Cliff Company traded in an old truck for a new one. The old truck had a cost of $300,000 and accumulated depreciation of $60,000. The new truck had an invoice price of $311,000. Huffington was given a $237,000 trade-in allowance on the old truck, which meant they paid $74,000 in addition to the old truck to acquire the new truck. If this transaction has commercial substance, what is the recorded value of the new truck? Multiple Choice $240,000 $300,000 $74,000 $311,000 $314,000
Reason Inc. sold its old equipment with original cost of P2,000,000 and accumulated depreciation of P1,800,000 for 3-year P250,000 note. The interest rate of the loan is 7% while the market rate of similar notes is 8%. The journal entry to record the disposal of the equipment would NOT include *
Belkin plc purchases a machine for £110,000 on 1 Jan 2015. The machine has no residual value, and an estimated useful life of 10 years. Belkin plc depreciates such machines yearly using the straight line method. On 1 Jan 2020, Belkin plc's management decides that the useful life was underestimated and should have been 15 years. What will be the annual depreciation charge for the year ended 31 December 2020?
A company which uses the revaluation model for its PPE bought a building on 1 January 2014 for £10m. The building has an estimated useful life of 50 years and nil residual value. On 31 December 2018, the building was revalued at £8.1m and on 31 December 2020 it was revalued for a second time at £7.8m. The company uses the straight-line method of depreciation for all PPE items. There was no change to the remaining useful life after each revaluation. What is the net effect of both revaluations on the statement of comprehensive income? Select one: a. A revaluation loss in the income statement of £2.2m b. A revaluation loss in the income statement of £1m c. A revaluation loss in the income statement of £1.2m d. A revaluation loss in the income statement of 0.84m e. A revaluation loss in the income statement of £4.2m f. A revaluation loss in the income statement of £1.4m
A company’s statement of profit and loss for the year ended 30 June 2019 showed a net profit of £83,600. It was later found £18,000 was paid for the purchase of a motor van had been debited to the motor expenses account. It is the company’s policy to depreciate motor van at 25% per year on a straight-line basis, with a full year charge in the year of acquisition What would be the net profit after adjusting for the error?
Caleb Company owns a machine that had cost $46,000 with accumulated depreciation of $20,200. Caleb exchanges the machine for a newer model that has a market value of $56,000. Record the exchange assuming Caleb paid $31,800 cash and the exchange has commercial substance. Record the exchange assuming Caleb paid $23,800 cash and the exchange has commercial substance.