Question

Graham manufactures and sells hiking and camping equipment. The business started trading on 1 January 2018 and purchased the following assets:

Plant and machinery	€80,000
Motor vehicles	€24,000

Graham decides to depreciate plant and machinery on the straight-line basis, expecting it to have a useful life of five years and a residual value of €5,000 at the end of that time.

Motor vehicles will be depreciated on the reducing-balance basis at the rate of 30% per annum.

1. What is the depreciation expense shown in the statement of profit or loss for the year ended 31 December 2018:

Depreciation expense:	€
Plant and machinery
Motor vehicles
Total depreciation expense

2. What is the total net book value of non-current assets in the statement of financial position as at 31 December 2018?

€

Please answer within 45 minutes maximum!

Answer 1

Assets	Depreciation Expense
Plant & Machinery	£                       15,000.00
Motor Vehicles	£                         7,200.00
	£                       22,200.00

Workings

Plant and Machinery = Cost Less Residual Value / Useful Life

= (80,000-5,000) / 5

= 15,000

Motor Vehicles = Cost x Depreciation Rate

= 24,000 *30%

= 7,200

Particulars	Plant & Machinery	Motor Vehicles
Cost	£               80,000.00	£         24,000.00
Less Depreciation	£               15,000.00	£           7,200.00
Net Book Value as at 31st Dec 2018	£               65,000.00	£         16,800.00