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Hello sir,
I need help with this case the teacher’s solution says one thing and mine says another I’ve been stuck on it for 5 days and my exam is on the 27thwould you please show me the correct method of handling this case out cuz its driving me mad
thank you very much sir I appreciate it
btw his answer was 625 profit
mine is 3500 lossA business has an accounting year end of 31 March. It purchased a truck on 1 April 20X3 at a
total cost of $21,000, including $1,000 for one year of insurance cover. At the date of purchase,
the truck had an estimated useful life to the business of eight years, and had an estimated
residual value of $3,000. The truck was traded in for a replacement vehicle on 31 March 20X8
at an agreed valuation of $10,000. The truck was depreciated on a straight-line basis, with a
pro-rated charge in the year of acquisition and disposal.
Calculate the profit or loss on disposal of the truck.Depreciation is charged at the rate of (20,000 – 3,000) / 8 = 2,125 per year.
It was owned for 5 years, and therefore the NBV at the date of sale was:
20,000 – (5 x 2125) = 9,375.It was sold for 10,000, and therefore the profit on sale = 10,000 – 9,375 = 625.
Have you not watched my free lectures on this? The lectures are a complete free course for Paper FA and cover everything needed to be able to pass the exam well.
can you link these lectures to me? and thank you so much I didn’t exclude the insurance cost cuz I thought 21,000 was the actual net worth.. silly me
and one more thing it was purchased in the first of april 2×13 (which the openning year) and disposed of on the end of march 2×18 ( year end)
so doesn’t that mean that the depreciation should be charged on 6 years? why 5?You can find the lectures (and all out other free material) by clicking on ACCA in the top bar and then choosing Paper FA.
The first year ends on 31 March 14, the second ends on 31 March 15, and so on. Keep counting and you will find there are 5 whole accounting years.
we dont count the first year in? but it says a pro-rated charge on the year of acquisition and disposal..
Yes – we do count the first year.
It was purchased on 1 April X3 and so the first year ends on 31 March X4.
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