Gce Model Questions Vol1 2020 Financial Accounting Question 15

The trial balance of a business (all amounts in £, debit unless indicated) before adjustments is: Cash 6,000  Bank 10,000  Accounts Receivable 9,000  Inventory 7,000  Equipment 25,000  Accumulated Depreciation - Equipment 6,000 (cr)  Accounts Payable 5,000 (cr)  Accrued Expenses 3,000 (cr)  Capital 50,000 (cr)  Drawings 4,000  Sales 40,000 (cr)  Purchases 18,000  Rent Expense 3,000  Salary Expense 5,000  Depreciation Expense —  The trial balance totals debit £80,000 and credit £80,000. The following adjustments are required: 1. Depreciation on equipment is 8 % of its cost. 2. One month of rent (annual rent £3,000) has been prepaid. 3. Closing inventory is £6,200 (opening inventory £7,000). 4. Additional accrued expenses of £1,500 have been incurred. After posting all adjustments, the adjusted trial balance shows a profit of £6,950. Determine the depreciation expense that should be recorded.