Exam 5: Depreciation and Amortization

On 31 December 20X4 Oksana's statement of financial position included the following information in respect of motor vehicles: Oksana's accounting policy is to depreciate motor vehicles on the reducing balance basis at 25% each year.On 31 December 20X5 she disposed of a vehicle that was bought on 1 January 20X3 at a cost of £18 700.She sold the vehicle for £6900, and acquired a replacement straight away for £21 250.There were no other acquisitions or disposals during the 20X5 accounting year. What is the carrying amount of Oksana's motor vehicles for inclusion in her statement of financial position at 31 December 20X5 (to the nearest £)?

Amie sells a motor vehicle for £6000.The carrying amount of the vehicle at the point of sale was £5400.Using the accounting equation, what is the effect of this transaction on Amie's business assets, capital and liabilities?

On 1 January 20X4 Solway Pharma Limited buys a licence to produce an anti-depressant.The licence runs for three years and costs £6 000 000.The directors decide to amortize the intangible asset in line with expected sales of the pills over the next three years. What is the amount of amortization in respect of this licence to be charged to the company's statement of profit or loss in the 20X5 financial year (to the nearest £)?

Kevin disposed of a non-current asset on 23 February 20X6 for £7752.He had bought the asset on 1 July 20X1 for £28 000, applying a policy of depreciating it over 8 years on the straight-line basis with 1/12^th of the annual depreciation charged for each full month of ownership.He assumed a residual value of £3000. What was the loss on disposal (to the nearest £)?

Norman runs a storage facility in which he uses two fork lift trucks.He depreciates them on a reducing balance basis at 20% each year.One of the fork lifts currently in use was bought on 1 January 20X1 for £18 220.As his business expanded he bought the second fork lift for £21 400 on 1 January 20X5. What is the carrying amount (to the nearest £) of fork lifts in Norman's accounts at his 31 December 20X6 year end?

Darlene depreciates shop fittings on a reducing balance basis at 25% each year.At her 31 December 20X4 year end the balances included in non-current assets in respect of shop fittings were: On 1 January 20X5, Darlene bought more shop fittings at a cost of £9650.She did not dispose of any shop fittings during the year. What was the depreciation charge in respect of Darlene's shop fittings in the year ended 31 December 20X5 (to the nearest £)?

Which one of the following statements about amortization is correct? Amortization:

Molly buys a new cash till on 1 July 20X4 for £1872.She does not expect it to have any residual value in four years' time, at which point she plans to replace it.She depreciates such assets on the straight-line basis, charging depreciation for each full month of ownership.What is the carrying amount of the till at Molly's year end on 31 October 20X5?

Griff runs a dance studio.Early in 20X1 he installed a new wooden floor at a cost of £54 000.He decided to depreciate the floor separately from the freehold building which he also owns.Griff reopened his studio after installation of the floor on 1 July 20X1.The floor was to be depreciated over a 25-year period on the straight line basis with a depreciation charge for each full month of ownership.On 26 April 20X5 the studio was flooded following heavy rains, and the floor was ruined.The insurance assessor asks Griff to calculate the carrying amount of the floor at that date to form a basis for negotiation of the insurance settlement. What was the carrying amount of the floor at 25 April 20X5?