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Hello !
In the question HARRINGTON, the examiner has not stated anywhere that the profit on disposal (30,000) was included in cost of sales. So in answer why he had deducted it from COS and why not put that in income statement as profit on disposal ?
Thanks
Hi
He has said, at the bottom of the table of figures, that all depreciation is charged to cost of sales. If you accept that a profit on the disposal of an asset is, thinking another way, an over-charge of depreciation in prior years, then for consistency the profit ( over-charged depreciation ) should be credited to cost of sales.
Does that make sense?
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