Richard runs a small publishing business. He buys a new XP27 printing machine on 1 January 2021 for £100,000 which he expects to use for five years. He predicts that the machine will then have a residual value of £10,000. Richard expects to print a total of 600,000 pages over the machine’s five-year life.

The actual output from the XP27 printing machine was as follows:

Required:

(a) Calculate the depreciation charge on the XP27 printing machine for each of Richard’s financial years ending 31 December 2021, 2022, 2023 and 2024 using:
(iii) the straight-line method;
(iv) the reducing balance method at a rate of 30% per year;
(v) the units of production method;
(vi) the sum of the years’ digits method.

(b) On 1 January 2025, Richard traded in the XP27 printing machine for a new XP44 model priced at £79,000. Richard paid £54,000 in full settlement for the new machine. For each of the four depreciation methods in part a), calculate the profit or loss that would arise on the disposal of the XP27.

Transcribed Image Text:

Year 2021 2022 2023 2024 Pages printed 123,000 147,000 101,000 117,000