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Can you help with this question please
Your firm bought a machine for $5,000 on 1 January 20X1, which had an expected useful life of four years and an expected residual value of $1,000; the asset was to be depreciated on the straight-line basis. The firm’s policy is to charge depreciation in the year of disposal. On 31 December 20X3, the machine was sold for $1,600.
What amount should be entered in the 20X3 statement of profit or loss and other comprehensive income for profit or loss on disposal?
A Profit of $600
B Loss of $600
C Profit of $350
D Loss of $400
The answer given by BPP is (D) but mine answer is (A).
BPP says carrying amount is $2000 while mine is $3000 because the question says depreciation is charge in the year of disposal. Please, explain. ThanksThere are three years of depreciation: X1, X2, and X3.
The depreciation is 1,000 per year. So the carrying value (net book value) at the date of sales is 5,000 – 3,000 = 2,000.Thank you for the answer and explanation. I appreciate your prompt response. It was my mistake, I was using the three years depreciation amount for carrying amount.
I also like to thank you for your help on other papers, I did my F1 and F2 in March with pass grade, your input at Opentuition can not be underestimated and I am grateful for this.
Thank you for your comments (and congratulations on passing F1 and F2 🙂 )
The plant and equipment account in the records of a company for the year ended 31 december 2006 is shown below.
PLANT AND EQUIPMENT – COST
2006 2006
1 january balance $960,000
1 july Cash $48,000 30 sep transfer disposal account $84,000
31 dec Balance $924,000
————- ———-
$1,008,000 $1,008,000The company’s policy is to charge depreciation on the straight line basis at 20% per year, with proportionate depreciation in the years of purchase and sale.
What should be the charge for depreciation in the company’s statement of profit or loss for the year ended 31 December 2006?
A. $184,800
B. $192,600
C. $191,400
D. $184,200I am puzzled why you are asking for the answer, because presumably the book in which you found the question also has the answers!!
Please in future ask about problems you have with the answer rather than just demanding an answer to the question.From 1 Jan to 30 Jun (6 months) the cost is 960,000, so the depreciation is 6/12 x 20% x 960,000
From 1 July to 30 Sep (3 months) the cost is 1,008,000, so the depreciation is 3/12 x 20% x 1,008,000
From 1 Oct to 31 Dec (3 months) the cost is 924,000, so the depreciation is 3/12 x 20% x 924,000
I’m really sorry sir. It won’t happen again. In the future i’ll ask you about the problems in the questions.
Hello sir, pls help me out with this question from acca hub
Renee bought a piece of machinery for $8,000 on 1st January X1 and incurred directly attributable costs of $2,000. The machine has an estimated life of 5 years with nil residual value. On 31st December X2, Renee decides to revalue the asset to $9,000. The machine was eventually sold for $5,000 on 1st January X5.
At the end of the Year 20X2, what is the carrying value of the machine and the revaluation surplus balance after revaluation?
A. Carrying Value $_____
B. Revaluation Surplus $_____My answer: 6000 and 3000
Their solution along with the answer :
Depreciation: Year 1 (20X1) = 10,000 ÷ 5 = 2,000. Closing balance is therefore $8,000.
In year 2, the machine is depreciated as normal as the revaluation only occurs during year-end (31 Dec X2).
Depreciation charge for Year 2 (X2) = $2,000
Carrying Value at at 31 Dec X2 = $8,000 (opening balance) ? $2,000 (depreciation for the year) = $6,000At year-end, the revaluation happens:
Gain/(Loss) in revaluation = $9,000 ? $6,000 = Gain $3,000
The double entry is: DR Machinery (NCA) $3,000; CR Revaluation surplus $3,000The answer is:
The carrying value $9,000
Balance in revaluation surplus $3,000My query: why is their carrying value in the answer 9000 when they have clearly calculated carrying amount as 6000. It is the market value that is 9000.
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