AAT Level 3 Accounts Prep Exam

AliceHenley93

Hello,

I'm wondering if anyone is able to help me. I am sitting my Accounts Prep exam next Friday 05/08/16.

I seem to be fine with the practise assessments other than the recording non-current asset in the general ledger.

The accumulated depreciation account postings using the diminishing method, the question is below:

- On 01/01/13 the business part exchanged an old machine for a new one with a list price of £3,500. A cheque for £1,000 was paid in full and final settlement and this amount has already been entered in the cash book.

- The old machine cost £4,000 on 01/01/11.

- The business's depreciation policy for machinery is 20% using the diminishing balance method.

The correct answer for the accumulated depreciation is £1,440. Can someone please tell me how this is right? I have tried every way possible and I cant come back to this amount.

Thank you!!
Alice

PeterC

1/1/11 Buy original machine....................................4,000
31/12/11 First year's depreciation 20%x4,000........ (800)
................................................................................3,200
31/12/12 Second year's depreciation 20%x3,200.... (640)
.................................................................................2,560

Total credited to Accumulated Depreciation = 800 + 640 = £1,440