5.1 Sole traders (3)

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1.

XYZ Company uses the straight-line method for depreciation. A machine cost £50,000 and is expected to have a useful life of 10 years with a residual value of £5,000. Calculate the annual depreciation expense for the first year of use.

2.

Question 3: A company has a stock of £25,000. £3,000 of this stock was taken by the owner for personal use. The owner has not yet made a claim for this. Explain the potential consequences if this adjustment is not made and how it should be recorded in the accounting records.

3.

A company has the following balances as at 31 December 2023:

  • Non-current Assets: Land & Buildings £150,000, Equipment £80,000
  • Current Assets: Inventory £30,000, Cash at Bank £10,000, Accounts Receivable £20,000
  • Current Liabilities: Accounts Payable £15,000, Short-term Loan £5,000
  • Non-current Liabilities: Long-term Loan £50,000
  • Capital: £100,000

State the components of the Statement of Financial Position shown in the data above. Explain briefly what each component represents.