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Dear Tutor,
I have a concen regarding this question“Michael stopped trading on 31 December 20Y3 after operating as a self-employed individual since 1 January 20X9.
At 1 January 20Y3, the tax written down value (TWDV) of his plant and machinery main pool was $6,200.
On 10 November 20Y3, he bought a computer costing $1,600.
All assets in the main pool were sold on 31 December 20Y3 for total proceeds of $9,800.Required:
Calculate the balancing charge arising on the disposal of the main pool assets when Michael’s business ceased.”The solution is that they deducted the proceeds of $9,800 from the sum of TWDV b/f and Addition of computer $(6,200 + 1,600 = 7,800). But I believe, they can only make the deduction that way if in the question it would have been said that “no item was sold more than its original cost”, is it right? Otherwise we cannot be sure the deduction amount should be $9,800.
Can you please enlighten me on this?
Thank you!If you’re given original cost and the sale proceeds, then you take the lower of the two, but if you’re not told otherwise, assume that all the items were sold for less than original cost.
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