Accounting Online Program Certification Practice Test

At what value should the machine be recognized on the statement of financial position for Jordanhill Ltd?

1. £16,000

2. £23,000

3. £14,000

4. £10,000

The correct answer is: £14,000

To determine the value at which the machine should be recognized on the statement of financial position, it's important to consider the appropriate measurement basis for non-current assets. Generally, non-current assets like machinery are recognized at cost, which includes the purchase price and any costs directly attributable to bringing the asset to its location and condition for intended use. In this scenario, the correct amount likely reflects the net book value after considering factors such as accumulated depreciation or impairment losses, if applicable. If the purchase price was £23,000, but later adjustments or depreciation have reduced the carrying value to £14,000, this would be the amount that should appear on the financial statements. This understanding directly aligns with the accounting principle that non-current assets should not be recorded at their original cost indefinitely but should be adjusted to reflect their current value in use, factoring in depreciation or impairment. Therefore, £14,000 is the accurate representation of the machinery's value on the statement of financial position for Jordanhill Ltd.