Your firm bought a machine for £5,000 on 1 January 20X1, when it had a useful life of four years and a residual value of £1,000. Straight-line depreciation is to be applied on a monthly basis. On 31 December 20X3, the machine was sold for £1,600. The amount to be entered in the 20X3 statement of profit or loss for profit or loss on disposal is:

On 1 June 20X9 a machine was sold which cost $20,000 on 31 July 20X5. Sale proceeds were $5,500 and the profit on disposal was $1,500. The depreciation policy for machinery is straight line with a full year being charged in the year of acquisition and none in the year of sale.What is the depreciation rate?

The managers of Navy Ltd are considering the depreciation policy for its non-current assets. The non-current assets cost £1,500,000, have an estimated useful life of 3 years and a residual value of £300,000. The accountant is suggesting a straight-line method of depreciation, but the managing director is suggesting a reducing balance method at a rate of 20%. Part a Calculate the depreciation expense for the first year of trading using each of the 2 depreciation policies suggested by the accountant and the managing director respectively. Part b Managers of companies have to make accounting policy choices (such as the depreciation policy), estimates, and assumptions when preparing the financial statements. These choices may affect asset and liability measurements and the resulting measurement of profit. Briefly explain what incentives might influence managers to make misleading policy choices and the factors that should be taken into consideration when deciding the depreciation policy.

ABC’s property originally cost £300,000. After 10 years use it was revalued by £200,000. This building is depreciated at 2% per annum. Calculate annual depreciation charges following the revaluation.