Included in Leonie's Fixed Assets Was a Piece of Machinery

question 16

Multiple Choice

Included in Leonie's fixed assets was a piece of machinery which cost £68000 and on which depreciation of £32000 had been charged. This was sold during the year for £28000. How would this be recorded in the statement of financial position?

• A) Reduce the fixed assets by £68000 and show an increase in bank of £28000
• B) Reduce the fixed assets by £36000 and show a corresponding increase in the bank
• C) Reduce the fixed assets by £68000, depreciation by £32000 and show an increase in the bank of £36000
• D) Reduce the fixed assets by £68000, depreciation by £32000 and show an increase in the bank of £28000
• E) None of the above

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Definitions:

Cash Distribution

The process of paying out earnings to stakeholders, often in the form of dividends to shareholders or distributions to partners.

Liquidation Balances

The final amounts owed to creditors and investors after a company has been liquidated and all assets have been sold off.

Liquidation Process

The procedure of closing a business by selling its assets to pay off its liabilities and distributing any remaining assets to the owners or shareholders.

Gain or Loss

Represents the difference between the sale price of an asset and its original purchase price, indicating a financial profit or deficit.