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O Level Accounting (7707)•7707/11/M/J/22
Question 16 from 7707/11/M/J/22

Explanation

Ambiguous depreciation starting point for newly purchased asset Steps:

  • The motor vehicles were bought on 1 May 2021 for 35,000,soAlf′sprovisionfordepreciationstartsat35,000, so Alf's provision for depreciation starts at 35,000,soAlf′sprovisionfordepreciationstartsat0 on that date.
  • The phrase "had been depreciated by $6,200" refers to prior owner's depreciation, which does not transfer to Alf's provision account.
  • For the full year to 1 May 2022, calculate depreciation as 20% × 35,000=35,000 = 35,000=7,000 using reducing balance on purchase cost.
  • Provision balance on 1 May 2022 is $7,000, but this is not among the options.

Not enough information to match any option, as the role of $6,200 in Alf's accounts is unclear.

Final answer: Not enough information.

Topic: Accounting for depreciation and disposal of non-current assets

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