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Dear Tutor please could you help for me..Thanks
1. A company has a year end of 31 January each year. They purchased a car for $12,000 on 1 January 2008, and sold it for $5000 on 31 March 2012.
Their depreciation policy is to charge 20% reducing balance, with a full years charge in year of purchase and none in the year of sale. What was the profit or loss on the sale of the car?Answer $1067.84 (Profit)
2. Your Business values inventory using the average cost method. At October 2008 there were 60 units in inventory value at $12 each. On 8th October 40 units were purchased at $15 each and a further 50 units were purchased for $18 each on 14th October. On 21st October 75 units were sold for $1200.
The value of the closing inventory at 31 October 2008 was:
Answer : 1110
Please start new threads when there are different topics.
First question:
We need to depreciate for year ended 31 January 2008, 2009, 2010, 2011, and 2012 – 5 years at 20% reducing balance.
First year is 20% x 12000 = 2400, leaving a carrying value of 9600
Second year is 20% x 9600 = 1920, leaving a carrying value of 7680
And so on.After 5 years depreciation, the carrying value is 3932.16
When it is sold, the profit on sale equals the proceeds of sale less the carrying value of 3932.16.
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