- This topic has 3 replies, 2 voices, and was last updated 7 years ago by
.
- Posts
How can you help me for this question i am unable to find an answer and also explain the steps please.
Plant and property
Accumulated depreciation at 1st January 2015 = 210000
Cost at 1 January 2015 = 258000
cost at 31 December 2015 = 310000Plant and machinery is depreciated at the rate of 10% per annum using the straight-line
method. A full year’s depreciation is provided in the year of purchase and none in the year of
disposal. On 1 June 2015 a machine, bought on 10 July 2007, was sold for $17 800. This resulted in a profit on disposal of $13 000.Prepare the disposal of machinery account for the year ended 31 December 2015
First, you really should not waste time attempting questions for which you do not have the answer. It is vital that you buy a Revision Kit from one of the ACCA approved publishers – they contain lots of exam-standard questions together with answers and workings.
Second, you cannot possibly be asked to write up a t-account in the exam. Although the exam will have a few questions testing your knowledge of double-entry, there will not be many – it is not a double-entry exam – and you certainly cannot be asked to prepare any t-accounts.
Given that the profit on disposal of the machine is 13,000, the net book value/carrying value must have been 17,800 – 13,000 = 4,800.
This net-book value must be the cost less 8 years depreciation (2007 to 2014) at 10% and therefore be 20% of the cost. So the original cost must have been 4,800/20% = 24,000 and the accumulated depreciation must have been 80% x 24,000 = 19,200.So…debit the disposal account with the cost of 24,000; credit the disposal account with the accumulated depreciation of 19,200; credit the disposal account with the proceeds of 17,800; debit the disposal account with the profit on sale of 13,000.
You can find an explanation of all of the entries by watching my free lectures on Depreciation. The lectures are a complete free course for Paper F3 and cover everything needed to be able to pass the exam well.
Thank you for your time and consideration sir. I will definitely follow your lectures and your advices.
- The topic ‘Disposal and Depreciation’ is closed to new replies.