6.2 Sally owns a small printing firm which has one large machine. You have been her accoun¬ tant for some years when, one day, she rushes into your office waving a piece of paper and shouting, ‘You fool. You’ve been making me depreciate my printing machine for years but now that it has worn out I find that I can’t afford to replace it. Look.’

You inspect the piece of paper she proffers you and find that it is a corner which, in her rage, she has torn off her latest balance sheet. The fragment reads:

You calm her down but she goes on. ‘Look! All my estimates proved to be correct. The machine lasted for as long as I expected and I shall be able to trade it in for £1,000 as I told you when I bought it. Lurthermore I have been very lucky in that the price of that particu¬ lar type of machine has not gone up for years. What is going to happen when my van packs up? I’m told that the price of that sort of van has doubled since I got mine.’
Answer her.

Transcribed Image Text:

Accumulated Fixed assets Cost depreciation NBV f f Printing machine 10,000 9,000 1,000 Van 1,000 800 200