Beaconhouse School System

Formal Assessment May 2023

Total Marks: 25 Time Allowed: 30 minutes
Name: Class:

1 Define the term depreciation: 1 marks

2 State three causes of dereciation: 3 marks

3 John purchased a machinery costing $75,000 from Argus Co on credit on

1 January 2016. He decided to depreciate the asset via straight line method.
Moreover, he is also confused about the other methods of depreciation.
He has hired you to take an advise on the methods of dereciation.
Estimated life of an asset is 10 years with a residual value of $3,000.
Required:
a Calculate depreciation for 3 years via using a straight line method. 3 marks
Workings:

Depreciation charge:
2016 $
2017 $
2018 $
b Calculate Depreciation for 3 years via using a diminishing mehthod. 6 marks
Diminishing balance percentage @25%.
Workings:

Depreciation charge:
2016 $
2017 $
2018 $

Net Book Value:

Formula
2016
2017
2018
c John is also having an option to use a revaluation method to depreciate its
machinery. He is seeking an advice that if the value of asset in the year ended
31 December 2016 is $65,000 and in the year ended 2017 and 2018 is $50,000
and $25,000 respectively. What would be the depreciation charge under the
revaluation method. 3 marks
Workings:

Depreciation charge:
2016 $
2017 $
2018 $

4a What is a capital expenditure? 2 marks

b What is a revenue expenditure? 2 marks

c Identify the following items of expenditure/receipts are capital or revenue in nature:

5 marks
i Cost of air conditioning the office of director.

ii Wages paid for manufacture of goods.

iii Renewing the electric wiring in the office.

iv Loan borrowed from bank

v Commission received via sale of goods.