Hugo Plc Has Acquired a Machine for £26 000 and It

question 33

Multiple Choice

Hugo Plc has acquired a machine for £26 000 and it cost a further £2000 to install and set up the machine for operation.It is expected to operate within normal parameters for 6 years.It will be technologically obsolete in 10 years.The expected salvage values are £1500 after 10 years and £2000 after 6 years.The benefits to be derived from the machine are expected to be greater in the early years of its life.What depreciation should be charged in each of the first two years of the equipment's life using sum-of-digits depreciation?

• A)Year 1: £8000, Year 2: £6667.67, Year 3: £5333.33
• B)Year 1: £4818.18, Year 2: £4336.36, Year 3: £3854.55
• C)Year 1: £7428.57, Year 2: £6190.48, Year 3: £4952.38
• D)Year 1: £4333.33, Year 2: £4333.33, Year 3: £4333.33

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Definitions:

Total Cost

The sum of fixed costs and variable costs incurred in the production of goods or services.

Units of Output

The quantity of goods or services produced by a firm or industry.

Total Costs

The sum of all the costs incurred in the production of goods or services, including both fixed and variable costs.

Swords

Weapons with a long metal blade and a hilt with a hand guard, used for thrusting or striking.