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Hi Sir,
Once again can you please help me solve this question.
A company has a year end of 31st 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 an full years of charge in the year of purchase and none in the year of sale.
What is the profit or loss on the sale of the car?I don’t really understand why you are asking me for an answer when surely you have an answer in whichever book you found the question? You should use this forum to ask about whatever it is in the answer than you are not clear about.
Also, have you actually watched my free lectures on depreciation? They cover everything needed to be able to answer this question and I cannot possible type them all out here.I presume that you know how to calculate reducing balance depreciation. You will apply it for each of 5 years (years end 31 Jan 2008, 2009, 2010, 2011, 2012).
The profit or loss on the sale will then be the difference between the proceeds of $5,000 and the carrying value (net book value).
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