ACCOUNTING

You are a member of the finance team of Hoverboards Ltd, a medium-sized company that sells ‘rideables’ and other electronic gadgets online, that it imports from overseas. A significant component of the Statement of Financial Position for Hoverboards Ltd is the computer equipment used in the business.

The company currently depreciates computer equipment at 30% on a reducing balance basis. On 1 February 2017, the company acquired new laptops at a cost of £90,000. 

The year-end for Hoverboards Ltd is 31 January 2018. 

a) Explain how the recognition of depreciation is an illustration of the accruals concept.

[6 marks]

b) For the new laptops, calculate the following for the years ended 31 January 2018 and 31 January 2019:

i. Depreciation expense for the year.

ii. Net book value at the year end.