T1 Week 8 Additional Practice Questions – Depreciation and Disposal of non-current
assets
Question 1
A firm buys a delivery van for business use. The van costs £16,000 and is expected to last
five years with an estimated scrap value of £500.
Produce a table comparing the depreciation and net book values for each year of the asset’s
life using the straight line and reducing balance methods of depreciation (take the rate of
50% for reducing balance).
Question 2
A firm buys equipment for business use. The equipment costs £2,500 and is expected to
last four years with an estimated scrap value of £200.
Produce a table comparing the depreciation and net book values for each year of the asset’s
life using the straight line and reducing balance methods of depreciation (take the rate of
30% for reducing balance).
Question 3
A firm purchases a delivery van for business use at a cost of £36,000. The van is expected
to have a three-year lifespan with no scrap value. Depreciation for the van will be charged
by using either the straight line method or the reducing balance method (using a rate of 70%
per annum).
Calculate the depreciation for each of the three years, using both methods.
Question 4
Equipment is purchased for £14,000 on 30 September 2015. It is depreciated using the
straight line method, with no residual value and an expected lifespan of seven years.
Depreciation is to be based on a monthly basis. On 1 April 2017, the equipment was sold
for £8,800.
Calculate the profit (gain) or loss on disposal of the sold equipment. The business’s
financial year ends on 31 December.
Question 5
Equipment is purchased on 30 June 2013 for £15,000 and is to be depreciated at 25% on
cost on a monthly basis.
Calculate depreciation expense and accumulated depreciation for the years 2013, 2014
and 2015.
Question 6
A lorry is purchased on 30 June 2014 for £10,000. It is to be depreciated using one of the
following two methods of depreciation:
(a) Straight line, on a monthly basis, with an expected scrap value of £2,000 and a lifespan
of five years.
(b) Reducing balance, using 30%, with a full year’s depreciation charged in the year of
purchase but none in the year of sale.
If the lorry is sold for £3,900, on 31 December 2017, calculate the profit or loss on disposal
using both of the above options for depreciation.
Question 7
A delivery van cost £32,000 and was purchased on 28 March 2016. It was depreciated at
a rate of 25% using the reducing balance method. A full year’s depreciation was charged
in the year of purchase but no depreciation was to be charged in the year of sale. The van
was sold for £13,000 on 4 April 2019.
Calculate the profit or loss on disposal of van.
Question 8
Equipment is purchased for £14,000 on 30 September 2015. It is depreciated using the
straight line method, with no residual value and an expected lifespan of seven years.
Depreciation is to be based on a monthly basis. On 1 April 2017, the equipment was sold
for £8,800.
Calculate the profit or loss on disposal of equipment.
Question 9
Black and Blue Ltd depreciates its forklift trucks using a reducing balance rate of 30%. Its
accounting year end is 31 December and depreciation is calculated on the basis of
complete months of ownership. On 31 December, it owned four forklift trucks:
(A) Bought on 1 January 2014 for £2,400
(B) Bought on 1 May 2015 for £2,500
(C) Bought on 1 October 2015 for £3,200
(D) Bought on 1 April 2017 for £3,600
Required: Calculate Depreciation expenses for each forklift truck for each year and Net
Book Value of each truck at the end of each year
Question 10
A printer costs £800, it will be kept for five years and then scrapped. Show your
calculations for the amount of depreciation each year if
(a) reducing balance method at the rate of 60% was used
(b) the straight-line method was used
Show net book value at the end of each year.
Question 11
Benitez commenced trading 1 January 2013, preparing accounts to 31 December each
year. Benitez's accounting policy is to provide a full years depreciation in the year of
acquisition and nothing in the year of disposal.
Benitez depreciates non-current assets at the following rates:
Plant and machinery – 25% straight line
Motor vehicles – 40% reducing balance.
Benitez had the following transactions in his first three years of trading:
1.1.2013 Purchased motor van X for £20,000
7.5.2013 Purchased machine A for £5,000
3.2.2014 Purchased machine B for £3,000
31.1.2015 Sold motor van X for £10,000 and replaced it with van Y costing £24,000
Required:
a) Calculate depreciation expense for each of the non-current assets for the years
31.12.2013, 31.12.2014 and 31.12.2015
b) Calculate the profit (gain) or loss on disposal of motor van X
Sources:
• Sangster, A. (2018). Frank Wood’s Business Accounting. Volume 1. Fourteenth
Edition. Pearson Education Limited.
• Wood, F., Horner, D. (2010), Frank Wood’s Business Accounting Basics. Pearson
Education Limited.
• Carey, M. et al (2011), Accounting, A Smart Approach, Oxford University Press
• Cox, D. & Fardon, M. (2007), Accounting: A general introduction to financial and
management accounting. Osborn Books
• Nobles et al. (2015) Horngren’s Accounting. Tenth Edition. Pearson
