31/M/J/16

1 ACM plc provided the following information about its non-current assets.

Accumulated Cost at Cost at

depreciation at 1 January 2015 31 December 2015
1 January 2015
$ $ $
Property 17 000 200 000 200 000
Plant and machinery 210 000 258 000 310 000
Delivery vans 10 000 23 000 23 000

Additional information

1 Half of the value of property relates to land. Property is depreciated at the rate of 1% per annum
using the straight-line method.

2 Plant and machinery is depreciated at the rate of 10% per annum using the straight-line
method. A full year’s depreciation is provided in the year of purchase and none in the year of
disposal.
On 1 June 2015 a machine, bought on 10 July 2007, was sold for $17 800. This resulted in a
profit on disposal of $13 000.
3 The delivery vans are depreciated at the rate of 25% per annum on the reducing balance
basis.
REQUIRED
(a) Prepare the disposal of machinery account for the year ended 31 December 2015. [6]

(b) Prepare the non-current assets schedule for inclusion in the published financial statements of
the company for the year ended 31 December 2015 in accordance with International
Accounting Standards. [8]

(c) Explain why a business depreciates its non-current assets. [3]

 23/O/N/18
2 JPG plc provided the following information about its non-current assets.
1 Balances at 1 January 2017 included the following.

$
Buildings
cost 400 000
provision for depreciation 38 000
Equipment
cost 256 000
provision for depreciation 61 000
Motor vehicles
cost 188 000
provision for depreciation 81 000

2 During the year ended 31 December 2017 the following took place:

new equipment costing $37 000 was bought

a motor vehicle with an original cost of $10 000, bought during 2016, was sold.

3 The company’s depreciation policy is as follows:

buildings at a rate of 2% per annum using the straight-line method

equipment at a rate of 10% per annum using the straight-line method

motor vehicles at a rate of 20% per annum using the reducing balance method.

A full year’s depreciation is charged in the year of acquisition and none in the year of
disposal.

4 On 31 December 2017 the buildings were revalued at $650 000.

REQUIRED

Calculate the net book value of non-current assets which will appear in the statement of
financial position at 31 December 2017. [6]
 23/O/N/19

3 Moser has provided the following information about his non-current assets for the year ended
30 November 2018.

1 Motor vehicles $
Cost at 1 December 2017 185 000
Accumulated depreciation at 1 December 2017 64 750
Purchased during the year 27 745

2 A motor vehicle was sold during the year for $12 450. It had originally cost $18 500 and had
a net book value of $13 875.

3 The motor vehicles depreciation policy is as follows:

Motor vehicles are depreciated at a rate of 25% per annum using the reducing balance
method.

A full year’s depreciation is charged in the year of purchase and no depreciation is charged
in the year of disposal.

REQUIRED

(a) State how a disposal of a non-current asset would affect the income statement and the
statement of financial position. Calculations are not required. [3]

(b) Prepare the non-current assets section of Moser’s statement of financial position at
30 November 2018.

Cost Accumulated Net book value

depreciation
$ $ $

(c) (i) Explain why the reducing balance method of depreciation is more appropriate than the
straight-line method for assets such as computer equipment. [4]
(ii) Explain why the revaluation method of depreciation is appropriate for assets such as
loose tools. [2]

[Total: 15]
 SP/16
4 Businesses depreciate their non-current assets.
REQUIRED

(a) State two reasons why a business depreciates its non-current assets. [2]

(b) Explain with examples why a business uses different rates of depreciation for different types
of assets. [3]

Additional information

Annette runs a trading business. Her trading year end is 30 June. She provided the following
information relating to her non-current assets at 30 June 2014.

Plant and Motor

machinery vehicles
$ $
Cost 500 000 300 000
Accumulated depreciation 200 000 100 000

During the year ended 30 June 2014 she provided depreciation of $50 000 on motor vehicles.

Her accounting policy is to depreciate non-current assets as follows:

Plant and machinery at 10% per annum using the straight-line basis
Motor vehicles using the reducing balance basis
A full year’s depreciation is charged in the year of purchase
No depreciation is charged in the year of disposal

During the year ended 30 June 2015 Annette purchased new machinery at a cost of $180 000.
She sold some old equipment for $38 000. This had cost $40 000 and had been purchased on
1 January 2013.
REQUIRED

(c) Calculate the depreciation charge for the year ended 30 June 2015 in respect of the plant
and machinery. [3]

(d) Calculate the rate of depreciation used by Annette for motor vehicles. [4]

Additional information:

Annette is thinking of changing the method of depreciation each year in order to show the highest
profit possible.

REQUIRED

(e) Advise Annette whether or not she should do this, giving two reasons for your answer. [3]

[Total: 15]
 21/O/N/18

5 A business depreciates its non-current assets.

REQUIRED

(a) Explain why a business should comply with the following concepts when accounting for
non-current assets. [4]

Additional information

T Limited prepares accounts to 30 June.

The following balances are available at 30 June 2017:

$
Plant and machinery at cost 174 300
Provision for depreciation 48 700

On 1 July 2017 the company disposed of a machine which had a net book value of $20 000. The
machine had been purchased on 1 July 2015.

On 1 October 2017 a new machine was purchased for $68 600 paid by cheque.

The company depreciates plant and machinery at 20% using the reducing balance method
calculated on a month-by-month basis. No depreciation is charged in the year of disposal.
REQUIRED

(b) Prepare the provision for depreciation on plant and machinery account for the year ended
30 June 2018. Dates are required. [8]

Additional information

Rather than paying immediately, the company had the option to pay in full for the new machine
15 months from the date of purchase.

REQUIRED

(c) Explain the impact on the financial statements for the year ended 30 June 2018 of paying for
the new machine 15 months from the date of purchase. [3]
[Total: 15]
 22/M/J/18

6 Butler operates a small business.

He has provided the following information for non-current assets at 31 July 2016.

$
Plant and machinery
Cost 195 000
Provision for depreciation 68 250

During the year ended 31 July 2017, the following transactions took place.

1 A machine was sold for $25 000. There was a loss on disposal of $3000. The machine had
been purchased on 28 May 2016.

2 A machine was purchased by cheque at a cost of $37 500. The following costs were also
incurred for the new machine:

$
Annual insurance 2825
Installation expenses 4500

Plant and machinery is depreciated using the reducing balance method at a rate of 20% per
annum.

A full year’s depreciation is charged in the year of purchase. No depreciation is charged in the
year of disposal.

REQUIRED

(a) Prepare the following ledger accounts for the year ended 31 July 2017. Dates are not
required.
(i) Plant and machinery at cost [3]
(ii) Provision for depreciation on plant and machinery [3]

REQUIRED
(b) Explain why a business may use reducing balance method of depreciation for plant and
machinery. [3]
Additional information

Butler also purchases loose tools for use in the business.

(c) Explain two accounting treatments for loose tools. [4]

(d) Explain one fundamental accounting concept relating to depreciation. [2]

[Total: 15]
 21/M/J/18

7 The following information has been extracted from the books of account of FA Limited at
1 January 2016.

$
Motor vehicles at cost 124 000
Motor vehicles provision for depreciation 54 250

The following information is also available.

1 All the company’s motor vehicles had been purchased on 1 January 2014.

2 On 1 July 2016, a new motor vehicle was purchased for $48 000. The cost was settled by a
cheque payment of $28 000, the balance by the part exchange of an old motor vehicle.

The vehicle that was part-exchanged had cost $36 000.

3 The company policy is to depreciate motor vehicles at 25% per annum using the reducing
balance method.

A full year’s depreciation is charged in the year of purchase, but none in the year of sale.

REQUIRED

(a) Prepare the following ledger accounts for the year ended 31 December 2016. (Dates are not
required.)

Motor vehicles at cost

Motor vehicles provision for depreciation

Disposal of non-current assets [6]

(b) Analyse the effect on the profit for the year ended 31 December 2016 if FA Limited had
always used the straight-line method of depreciation at 20% per annum. Show your
workings. [5]
(c) Explain two accounting concepts that apply to making the annual charge for depreciation. [4]

[Total: 15]
 22/O/N/17

8 K Limited has been trading for many years and prepares financial statements annually to 30 April.
It had the following balances at 1 May 2016:

$ $
Plant and equipment
at cost 84 695
provision for depreciation 32 855

On 1 February 2017, the company bought new equipment, $12 785, and the cost of installing this
equipment was $1595.

On 31 December 2016 the company sold a motor vehicle which had cost $14 850 on
1 August 2015. The proceeds of $8900 were paid by cheque.

The company’s depreciation policy is as follows:

Plant and equipment 20% on cost per annum

Motor vehicles 25% reducing balance per annum

Depreciation is charged on a month-by-month basis.

REQUIRED

(a) (i) Calculate the depreciation charge for plant and equipment for the year ended
30 April 2017. Workings must be shown. [2]
(ii) Prepare the motor vehicle disposal account for the year ended 30 April 2017. Workings
must be shown. [4]

(b) Explain two accounting concepts which are being applied when depreciation is provided. [4]

Additional information

K Limited is considering purchasing additional plant and equipment costing $30 000. This could
be financed by one of the following:

Bank loan
Issue of ordinary shares

REQUIRED

(c) Advise the directors which method of finance they should choose. Justify your answer. [5]

[Total: 15]
 21/O/N/17

9 The directors of W Limited have provided the following balances at 1 August 2016:

Accumulated Net book

Cost depreciation value
$ $ $
Motor vehicles 125 000 43 750 81 250

The company policy is to provide depreciation on motor vehicles at 20% per annum using the
reducing balance method. Depreciation is charged on a month-by-month basis.

During the year ended 31 July 2017, the following transactions took place:

1 A motor vehicle was purchased on 31 January 2017 at a cost of $28 230.

2 A motor vehicle was sold on 28 February 2017 for $14 600. It had originally been purchased
on 30 April 2015 at a cost of $19 500.

3 There were no other additions or disposals of motor vehicles during the year.

REQUIRED

(a) State the double entry required to record the disposal of a non-current asset before the profit
or loss on disposal is transferred to the income statement (amounts are not required).

accounts to be debited accounts to be credited

[6]
  (b) Prepare the provision for depreciation on motor vehicles account for W Limited for the year
ended 31 July 2017 (dates are not required). [7]

(c) Calculate the effect on profit for the year of each of transactions 1 and 2. [2]

[Total: 15]
 22/F/M/17

10 King provided the following information for non-current assets at 1 April 2015.

$
Property plant and machinery
Land and buildings – cost 252 000
Plant and machinery – cost 123 000
Accumulated depreciation
Buildings 21 000
Plant and machinery 49 000

During the year ended 31 March 2016, the following took place:

1 Land was revalued to $202 500. It had originally cost $182 000.

2 A machine was sold on 30 November 2015. It had a net book value on 1 April 2015 of $46 350
and an original cost of $76 200.

3 A machine was purchased on 1 December 2015 at a cost of $62 850.

The depreciation policy for non-current assets is as follows:

Buildings 2% per annum using the straight-line method

Plant and machinery 20% per annum using the reducing balance method

Depreciation is charged on a month-by-month basis.

REQUIRED

(a) Calculate the total depreciation charge for buildings for the year ended 31 March 2016. [1]

(b) Calculate the total depreciation charge for plant and machinery for the year ended

31 March 2016. [3]

(c) Prepare an extract from the statement of financial position at 31 March 2016 for non-current
assets.

King
Extract from Statement of Financial Position at 31 March 2016

Accumulated
Cost / Valuation Depreciation Net Book Value
$ $ $
[8]

(d) State three causes of depreciation. [3]

[Total: 15]
 22/M/J/14

11 SMC Limited is a wholesale business. An extract from their statement of financial position
at 31 December 2012 showed:
Non-current Assets
$ $ $
Fittings and fixtures 240 000 96 000 144 000
Equipment 60 000 18 000 42 000

SMC Ltd has a policy to depreciate fittings and fixtures at 20% per annum on cost (straight line
method) and equipment at 10% per annum on cost. Depreciation is charged for each month of
ownership.

No allowance is made for any residual value.

All fittings and fixtures held by the company at the end of the financial year had been purchased
within the previous four years. All equipment had been purchased within the previous seven
years.

During the year ended 31 December 2013 the following transactions took place:

Purchases

1 January 2013 fittings and fixtures $16 000, purchased on credit from Walker.
1 July 2013 equipment $14 000, purchased on credit from Arcadia Limited.

Disposals

31 March 2013 equipment (original cost $8 000, bought on 1 January 2010) was sold for $6 000.

Disposal proceeds were received in full by cheque.

REQUIRED

(a) Prepare journal entries to record the following (narratives are not required).

(i) The purchase of the equipment. [2]

(ii) The depreciation charge for fittings and fixtures for the year ended 31 December 2013.[4]

(iii) The depreciation charge for equipment for the year ended 31 December 2013. [4]

(iv) The disposal of equipment. [8]

(b) (i) Explain the purposes of the journal. [2]

(ii) State two examples of transactions which would be recorded in the journal, other than
the purchase of non-current assets on credit. [2]
Additional information

SMC is considering changing the depreciation method for equipment to reducing balance
method.

REQUIRED

(c) (i) State an accounting concept which is applied when depreciation is provided. [1]

(ii) Explain the possible reasons why the business is considering this change. [7]

[Total 30]
12. Helen Ossetia provides the following information for the year ended 31 May 2013.

Non-current assets Buildings Machinery Motor vehicles Total

$000 $000 $000 $000

Cost 2000 2000 700 4700

Accumulated depreciation
at 31 May 2013 (120) (800) (300) (1220)
Net Book Value 1880 1200 400 3480

Depreciation charge for the year 40 400 100 540

A full year’s depreciation is charged in the year of purchase and no depreciation is charged in the
year of disposal.

Buildings and machinery are depreciated using the straight line method.

Motor vehicles are depreciated using the reducing (diminishing) balance method.

REQUIRED

(a) Explain why Helen needs to depreciate her non-current assets. [3]

(b) State three causes of depreciation of motor vehicles. [3]

(c) Calculate the rate of depreciation used by Helen at 31 May 2013 to depreciate each class of
non-current asset. 2%, 20%, 20% [4]

(d) Explain why machinery is usually depreciated using the straight line method while motor
vehicles are usually depreciated using the reducing balance method. [4]

Additional information

During the year ended 31 May 2014:

1 Helen bought new machinery costing $720 000 and sold old machinery which had cost
$160 000. The old machinery had been bought on 1 December 2011.

2 Helen bought a new motor vehicle. She traded in an old vehicle valued at $40 000 and paid
the balance of $160 000, by cheque.

The trade in vehicle had cost $100 000 and had a net book value of $60 000 at the date of
disposal.

3 A new building costing $1 000 000 was completed during the year.

REQUIRED

(e) Complete the non-current asset schedule below for the year ended 31 May 2014. [16]
3 000, 2 560, 800, 2 820, 1,312, 432
13 . Richard commenced business on 1 May 2011. At the end of the first year of trading an extract
from his statement of financial position showed:

Non-current assets Cost Accumulated Net book value

Depreciation
$ $ $
Freehold land and Buildings 100 000 2 000 98 000
Machinery 64 000 16 000 48 000
Motor vehicle 12 000 3 600 8 400

Richard has a policy to depreciate non-current assets as follows:

• Buildings at 2% per annum on cost.

• Machinery at 25% per annum on cost.
• Motor vehicles at 30% per annum using the reducing balance method.
• Depreciation is charged for each month of ownership.

On 1 August 2012 additional machinery, costing $18 000, was purchased.

On 1 January 2013 a new motor vehicle costing $24 000 was purchased. On the same date the
old motor vehicle was traded in. Richard received an allowance of $2 600 against the cost of the
new vehicle. The vehicle disposed had originally cost $12 000 and was purchased on
1 May 2011. All payments and receipts for purchases and disposals were in cash.

REQUIRED

(a) Prepare the following ledger accounts for the year ended 30 April 2013. Dates are not
required.

(i) Motor vehicles (at cost) [5]

(ii) Provision for depreciation of motor vehicles [5]

(iii) Disposal of motor vehicles [5]

(b) Calculate the depreciation charge for the year ended 30 April 2013 to be shown in the
income statement, clearly identifying the amount charged for each category of asset. [6]

Additional information

Richard is considering the admission of a partner and feels that he should be rewarded for his
efforts in starting and developing the business. His accountant has advised him that there is an
asset called goodwill.

REQUIRED

(c) Explain the meaning of the term goodwill and suggest two reasons how it may arise. [5]

(d) Explain how goodwill should be treated in the books of partnership. [4]
14 . Bach runs a manufacturing business. An extract from his statement of financial position at
1 January 2012 is shown below:

Non-current Accumulated
assets Cost depreciation Net book value
$ $ $
Factory premises 220 000 26 400 193 600
Machinery 138 600 52 200 86 400

During 2012 the following transactions took place for machinery.

Disposals

Machinery Year of Disposal

Date reference purchase Initial cost proceeds
$ $
26 March M12 2009 14 000 7 100
17 August M18 2008 8 000 1 320
13 December M20 2007 9 600 850

Additions

Machinery
Date reference Cost
$
20 April M27 11 500
25 October M31 16 200

All receipts and payments for these transactions are processed through the business bank
account.

All of the remaining machinery at 31 December 2012 was purchased after 2008.

Depreciation on the factory premises is charged on a straight line basis based on a 50 year
life, with no residual value.

Depreciation on machinery is charged on a straight line basis based on a five year life and
an estimated residual value of 10% of the original cost.

It is the company policy to charge a full year’s depreciation in the year of purchase but none
in the year of disposal.

REQUIRED

(a) Prepare the following ledger accounts for the year ended 31 December 2012.

(i) Machinery account

[5]
(ii) Provision for depreciation of machinery account [6]
(iii) Machinery disposals account [6]

(b) Identify two alternative methods of providing for depreciation. [2]

(c) State three causes of depreciation. [3]

Bach’s statement of financial position showed the following at 1 January 2013:

Trade receivables $12 000

Trade payables $10 000

Bank balance $800 Dr

Sales are paid in full one month after the sale

Purchases are payable 50% in the month of purchase, the remainder one month later

Other expenses are paid in the month they occur

Budgeted sales, purchases and other expenses for the period January to March 2013 are
as follows:

January February March

$ $ $
Sales 10 000 12 000 14 000
Purchases 8 000 12 000 16 000
Other expenses 5 000 5 000 5 000

(d) Complete the following table to show the budgeted closing bank balance on
31 March 2013. [6]

(e) Suggest two ways Bach could improve his budgeted bank balance at 31 March 2013. [2]
15 . Amirtha commenced business on 1 January 2010. During the first two years of business
the following non-current assets were purchased on the dates shown:
Motor vehicles
2010 $
1 January MV1 26 000
1 July MV2 18 000
2011
1 April MV3 24 000

Equipment
2010
1 January EQ1 30 000
2011
1 January EQ2 44 000

Amirtha has a policy to depreciate motor vehicles at 20% per annum on cost (straight
line method) and equipment at 15% per annum on cost (straight line method), rates
being charged for each month of ownership.

REQUIRED

(a) Calculate the total depreciation for each of the years 2010 and 2011.

(i) Motor vehicles [3]

(ii) Equipment [2]

Early in 2012, consideration was given to changing to the reducing (diminishing)

balance method, with the following rates applying to the balance at the end of each
year.
Motor vehicles 25%
Equipment 20%

A full year’s depreciation would be charged irrespective of the date of purchase.

REQUIRED

(b) Calculate the total depreciation for each of the years 2010 and 2011, using the
reducing (diminishing) balance method for:
(i) Motor vehicles [5]
(ii) Equipment. [3]

The original profits for the first two years in business were:
2010 $86 000
2011 $94 000

REQUIRED
(c) Prepare a statement to show the revised profits for the years 2010 and 2011, if
the reducing (diminishing) balance method had been used. [4]

(d) Explain why it is appropriate to use the reducing (diminishing) balance method for
motor vehicles. [3]
16 .
Sarah runs a wholesale business. An extract from her statement of financial position
(balance sheet) at 31 December 2009 shows:

Motor vehicles at cost $371 000

Motor vehicle accumulated depreciation $130 000

During the financial year ended 31 December 2010 the following transactions took place.

1 A motor vehicle purchased on 1 January 2006 for $9200 was sold on

30 June 2010 for $500.

2 A motor vehicle was purchased on 1 April 2010 for $15 000.

Depreciation is charged at 20% per annum on cost, with the rate being applied for each
part of the year. No allowance is made for any residual value.

All motor vehicles held by the company at 31 December 2010 had been purchased
within the previous five years.

All transactions are by cheque.

REQUIRED

(a) Prepare the following ledger accounts for the year ended 31 December 2010.

(i) Motor vehicles account [4]

(ii) Provision for depreciation of motor vehicles account [4]

(iii) Motor vehicle disposal account [4]

(b) Prepare an extract from the statement of financial position (balance sheet) for
non-current assets at 31 December 2010. [2]

(c) Explain why businesses provide for depreciation on their non-current assets. [6]
17 . Depreciation may be thought of as the difference between the cost of an asset and the
amount received from it on disposal.

The following extract from the schedule of non-current (fixed) assets applies to the year
ended 30 April 2009.

Non-current (fixed) assets Machinery Motor vehicles

$000 $000
Cost at 1 May 2008 4200 3200
Additions during year 1200 800
Disposals during year (700) (1000)
Cost at 30 April 2009 4700 3000

Depreciation at 1 May 2008 1560 840

Add charge for year 470 750
Less disposals for year (520) (800)
Depreciation at 30 April 2009 1510 790

Net book value at 30 April 2009 3190 2210

During the year ended 30 April 2010 the following took place:

1 New machinery costing $900 000 was purchased on 1 November 2009. Machinery,
which had cost $400 000 on 1 July 2005, was sold for $200 000 in December 2009.

2 Three new motor vehicles were purchased on 1 April 2010 for $280 000 each. Two motor
vehicles, which had been purchased on 1 March 2007, for $200 000 each, were taken in
part-exchange. The part-exchange allowance for each vehicle was $60 000.

3 One vehicle which had been purchased for $360 000 on 31 January 2009 was involved
in an accident on 2 December 2009. The insurance company decided that it could not
be repaired and gave compensation of $210 000.

Depreciation is charged for the full year on all non-current (fixed) assets held at the year-
end, using the straight-line method.

No depreciation is charged on a non-current (fixed) asset in the year of disposal.

Rates of depreciation have remained constant since the business began trading.

REQUIRED

(a) (i) Calculate the profits or losses on disposals during the year ended 30 April 2010.
[12]
(ii) Prepare a schedule of non-current (fixed) assets for the year ended 30 April 2010,
using the layout given at the beginning of the question.
[8]
(b) (i) State three causes of depreciation. [3]

(ii) Give an example of a non-current (fixed) asset for which each cause given in (b)(i)
above might be appropriate. [3]

(c) State four factors which must be taken into account when deciding how much
depreciation to charge. [4]
18. Alex's fixed asset accounts and provision for depreciation on fixed asset accounts for the
year ended 30 April 2008 were as follows:

Furniture and equipment account

$000 $000
2007 2007
1 May Balance b/d 2 700 5 July Disposal 450
3 June Bank 720 2008
30 April Balance c/d 2 970
3 420 3 420
2008
1 May Balance b/d 2 970

Provision for depreciation on furniture and equipment account

$000 $000
2007 2007
5 July Disposal 345 1 May Balance b/d 945
2008 2008
30 April Balance c/d 897 30 April Profit & loss 297
1 242 1 242
1 May Balance b/d 897

Motor vehicles account

$000 $000
2007 2007
1 May Balance b/d 1 560 3 Oct Disposal 330
3 Oct Bank 570 2008
30 April Balance c/d 1 800
2 130 2 130
2008
1 May Balance b/d 1 800

Provision for depreciation on motor vehicles account

$000 $000
2007 2007
3 Oct Disposal 285 1 May Balance b/d 675
2008 2008
30 April Balance c/d 840 30 April Profit & loss 450
1 125 1 125
1 May Balance b/d 840
During the year ended 30 April 2009 the following transactions took place:

1 On 1 June 2008 new equipment was purchased for $540 000.

On 3 December 2008 new furniture was purchased for $80 000.
On 3 September 2008 equipment which had been purchased on 31 March 2006 for
$300 000 was sold for $132 000.

2 On 1 February 2009 three new motor vehicles were purchased for $80 000 each. On
the same date a vehicle which had cost $56 000 on 15 May 2005 was sold for $20 000.

A full year’s depreciation is provided for on all fixed assets in use at the end of the financial
year but none is provided for in the year of disposal of a fixed asset.

The rates of depreciation applied on cost for the year ended 30 April 2008 continue to be
applied for the year ended 30 April 2009.

REQUIRED

(a) Prepare the following accounts for the year ended 30 April 2009:

(i) Furniture and equipment [5]

(ii) Motor vehicles [4]

(iii) Provision for depreciation on furniture and equipment [4]

(iv) Provision for depreciation on motor vehicles [4]

(v) Disposal of furniture and equipment [4]

(vi) Disposal of motor vehicles. [4]

(b) Explain the term ‘depreciation’ and give one example. [5]