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

question 7

Multiple Choice

Included in Leonie’s fixed assets was a piece of machinery which cost £68 000 and on which depreciation of £32 000 had been charged. This was sold during the year for £28 000.
- what would be the effect, if any, on the income statement and the cash flow statement?

• A) Show a loss on sale of fixed asset in the income statement of £8000 and show that as a cash outflow
• B) Show a loss on sale of fixed asset in the income statement of £40000 and show that as a cash outflow
• C) Show a loss on sale of fixed asset in the income statement of £8000 and show a cash inflow of £36000
• D) Show a loss on sale of fixed asset in the income statement of £8000 and show a cash inflow of £28000
• E) None of the above

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Definitions:

Fuel Mix

The combination of various fuel sources used to generate energy or power.

Two-Cycle Engine

An internal combustion engine that completes a power cycle with two strokes of the piston during only one crankshaft revolution.

Ratio

A mathematical expression that represents the relationship between two numbers, showing how many times one value contains or is contained within the other.

Equivalent Ratio

Ratios that express the same relationship between numbers, even though they may look different.