A business depreciates its motor vehicles at 20% per annum using the straight-line method. Depreciation is charged on a month-by-month basis.

On 30 June in the current financial year, a new van was purchased at a cost of $20000. An old van which cost $18000, bought at the beginning of the previous year on 1 January, was part exchanged for $14000. The balance was paid by cheque.

What is the total reduction in profit for the current financial year ended 31 December as a result of this?

Q: What topic does this question test?

This question tests Depreciation and Disposal of Non-Current Assets in A-Level Accounting (syllabus code 9706). It is worth 1 mark.

Q: Which exam paper is this question from?

This question appeared in the Cambridge A-Level Accounting Feb/Mar 2025 examination, Paper 1 Variant 2 (9706_m25_qp_12.pdf).

Question

A business depreciates its motor vehicles at 20% per annum using the straight-line method. Depreciation is charged on a month-by-month basis.

On 30 June in the current financial year, a new van was purchased at a cost of $20000. An old van which cost $18000, bought at the beginning of the previous year on 1 January, was part exchanged for $14000. The balance was paid by cheque.

What is the total reduction in profit for the current financial year ended 31 December as a result of this?

Oracle Prep · Accepted Answer

The correct answer is A: $2400.

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