Non-current assets FA Revision Flashcards
Wacko had an allowance for receivables at 1 January 20X0 of £1,000. He calculates that at 31 December 20X0 a provision of £1,500 is required. In addition, £2,000 of debts were written off during the year, which includes £50 previously provided for.
How much should be included in Wacko’s income statement in relation to irrecoverable debt expense for the year ended 31 December 20X0?
£
Increase in allowance (1,500 − 1,000) 500
Irrecoverable debts 2,000
————
2,500
————
At 31 March 20X3 Penelope Ltd had receivables of £800,000. On analysing the list of receivables, it is decided to write off debts of £8,000, to provide 100% against specific debts amounting to £12,000 and to increase the general allowance to 5% of remaining receivables at 31 March 20X3.
At 31 March 20X2 there had been a specific allowance of £16,600 and a general allowance of £9,000.
What is the charge for irrecoverable debts expense in the company’s income statement for the year ended 31 March 20X3?
£ £
Opening allowance – specific 16,600
general 9,000
25,600
Closing allowance required – specific 12,000
general
5% × (800,000 − 8,000 − 12,000) 39,000
51,000
Increase in allowance 25,400
Bad debt written off 8,000
Income statement charge 33,400
At the beginning of its accounting period, a business has receivables of £13,720 after deducting a specific allowance of £350 and a general allowance against 2% of the remainder.
At the year-end receivables before any allowances amount to £17,500. No specific allowance is to be made but the general allowance is to be increased to 3% of receivables.
What is the charge or credit on the income statement in relation to irrecoverable debts expense for the year?
Opening allowance - specific 350 general (2/98 × 13,720) 280 630 Closing allowance - 17,500 × 3% 525 Decrease in allowance 105
A business has receivables at its year-end of £102,400. It was decided that a debt of £2,200 and another of £1,840 should be written off. A specific allowance for receivables of £1,360 is required and a general allowance for receivables of 2% of receivables.
The opening allowance at the start of the year was £2,900.
What is the closing allowance for receivables?
£
Specific allowance 1,360
General allowance
2% × (102,400 − 2,200 − 1,840 − 1,360) 1,940
————
Closing allowance 3,300
A business acquired new premises at a cost of £250,000 on 1 January 20X1. In the period to the year-end of 31 March 20X1, the following further costs were incurred.
£
Costs of initial adaptation of the building 8,500
Legal costs relating to the purchase 1,200
Monthly cleaning contract 9,600
Cost of air conditioning unit necessary for premises to be used 5,400
Cost of machinery 8,700
What amount should appear as the cost of premises in the company’s statement of financial position at 31 March 20X1?
£
Cost of premises 250,000
Initial adaptation 8,500
Legal costs 1,200
Air conditioning unit 5,400
————
265,100
————
Given below are extracts from a company’s statement of financial position:
31 March 2003 31 March 2002
£ £
Non-current assets
Cost 100,600 83,400
Accumulated depreciation 47,600 32,500
During the year ending 31 March 20X3, non-current assets with a cost of £18,500 and carrying amount of £9,400 were sold at a profit of £500.
What is the depreciation charge for the year?
Accumulated depreciation
£ £
Disposal 9,100 Op/bal 32,500
(18,500 − 9,400)
Clos/bal 47,600 Dep’n charge 24,200
———— ————
56,700 56,700
A piece of machinery, which had cost £14,000 on 1 January 2001, was sold on 01 January 2005 for £4,000. Machinery is depreciated at 20% per annum straight line. The business’s year-end is 30 September 2005.
What is the profit on the sale of this machinery in pounds?
1,200 is the correct answer because 4 years depreciation will have been charged, so carrying amount is £14,000 − (£14,000 × 20% × 4) = £2,800. Proceeds are £4,000, giving a profit of £1,200.
A business part-exchanges an old motor vehicle for a new vehicle. The old vehicle originally cost $12,000 and had a carrying amount of $7,000 when it was disposed of. A part-exchange allowance of $6,000 was given against the cost of the new vehicle of $18,000.
What profit or loss was made on the disposal of the old motor vehicle?
Profit/loss on disposal = proceeds - carrying amount
= $6,000 - $7,000
= $1,000 loss
Mario bought a van for his business on 30 June 20X1 for £13,750, including £150 for a road fund licence.
Mario depreciates motor vehicles at 20% per annum on cost, charging depreciation on a monthly basis. His year-end is 31 December. On 1 January 20X4 Mario traded in the van for a new one, receiving a part-exchange allowance of £7,250.
What was the profit on disposal of the van?
Disposals
£ £
Cost 13,600 Acc depn 6,800
(13,750 − 150) (13,600 × 20% × 2.5)
IS – profit on sale (ß) 450 Cost 7,250
(part exchange allowance)
14,050 14,050
Proceeds = 7,250 (the part exchange allowance)
Cost = 13,750 – 150 = 13,600 (the licence does not get capitalised)
Accumulated depreciation = 13,600 × 20% × 2.5 = 6,800
Carrying amount = 13,600 – 6,800 = 6,800
Profit = proceeds – carrying amount = 7,250 – 6800 = 450
At 1 January 20X4, a business owned motor vehicles which had cost a total of £40,000.
On 1 April 20X4 the business disposed of a motor vehicle which had cost £10,000 and on 1 September 20X4 the business acquired a motor vehicle which cost £15,000.
The business charges depreciation on motor vehicles at the rate of 25% per annum on the straight-line basis with proportionate amounts being charged in the year of acquisition or disposal based on the number of months ownership.
What is the depreciation charge in respect of motor vehicles for the year ended 31 December 20X4?
Assets held all year £7,500
(40,000 - 10,000) × 25%
Disposal £625 10,000 × 25% × 3/12 Acquisition £1,250 15,000 × 25% × 4/12 Total depreciation £9,375
