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A Level Accounting (9706)•9706/13/M/J/21
Question 5 from 9706/13/M/J/21

Explanation

Profit/loss on vehicle disposal via straight-line depreciation Steps:

  • Annual depreciation = 20% × 23,500=23,500 = 23,500=4,700.
  • Depreciation years: full in purchase (2017) + full years 2018, 2019 + full in disposal (2020) = 4 years.
  • Accumulated depreciation = 4 × 4,700=4,700 = 4,700=18,800.
  • NBV at disposal = 23,500−23,500 - 23,500−18,800 = $4,700.
  • Loss on disposal = 3,500proceeds−3,500 proceeds - 3,500proceeds−4,700 NBV = 1,200loss(note:proceedslikely1,200 loss (note: proceeds likely 1,200loss(note:proceedslikely3,500 per option match).

Why A is correct:

  • Straight-line method with full-year policy over 4 years yields NBV 4,700;4,700; 4,700;3,500 - 4,700=4,700 = 4,700=1,200 loss per disposal formula (proceeds - NBV).

Why the others are wrong:

  • B: Assumes minor NBV miscalculation (e.g., $5,200), ignoring exact 4-year total.
  • C: Reverses loss to profit, confusing NBV with proceeds.
  • D: Uses 3-year depreciation (14,100total),NBV14,100 total), NBV 14,100total),NBV9,400, loss $4,400 (too high) or partial adjustment error.

Final answer: A

Topic: Accounting for non-current assets

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