A Level Accounting (9706)•9706/12/O/N/22
Explanation
Reverse reducing balance depreciation for one year Steps:
- Let original cost = C.
- Full year's depreciation charged in year of purchase (2021, assuming intent), so net book value at 31 December 2021 = C × (1 - 0.25) = 0.75C.
- Set 0.75C = 18,000.
- Solve: C = 18,000 ÷ 0.75 = 24,000.
Why B is correct:
- Reducing balance depreciation retains 75% of the opening balance each year; after one full year on purchase, closing NBV is 75% of cost, so cost = NBV ÷ 0.75.
Why the others are wrong:
- A: 0.75 × 22,500 = 16,875 (understates NBV).
- C: 0.75 × 27,000 = 20,250 (overstates NBV).
- D: 0.75 × 20,000 = 15,000 (understates NBV).
Final answer: B
Topic: Accounting for non-current assets
Practice more A Level Accounting (9706) questions on mMCQ.me