- June 20, 2017 at 9:49 pm
An entity bought a machine on 1 October 20×2 for $ 52,000.The machine had an expected life of eight years and an estimated residual value of $4,000.
On 31 March 20×7 the machine was sold for $35,000.The entity’s year-end is 31 December. The entity uses the straight line method for depreciation and it charges a full year’s depreciation in the year of purchases and none in the year of sale.
What was the profit or loss on disposal of the machine?
Please show all the calculation!June 21, 2017 at 7:29 am
The machine will be written down from 52k to 4k over 8 years.
Work out its NBV at the dste of disposal (note you are told there is no charge in the final year). The difference between the NBV and the proceeds is the profit or loss on disposal.July 27, 2017 at 10:55 am
As the asset value is 52k and full depreciation on purchase year and no for disposal year, it means calculation like
asset value 52k
Depreciation 20×2 to 20×6 (52k-4k(as the residual value))/8 years*5 years
Now the net book value of the asset is (52k-30k)=22k
Sell price is 35k and net book value is 22k so 13k is profit as you have sold the asset more than its value.
Hope you understandDecember 11, 2017 at 1:05 pm
52000 – 4000 ÷ 5 = 9600 (per year)
9600 * 5 = 48000
48000 – 35000 = 13000 (profit)December 26, 2017 at 10:54 am
Depreciation per year = (52K – 4K)/8 = 6000 pa.
Bought accounting y/e 31/12/20X2, sold accounting y/e 31/12/20X7, but no depreciation in the final year.
So depreciation for X2, X3, X4, X5, X6: 5 years
Accoumulated depreciation at date of sale = 5 x 6,000 = 30,000
NBV at sale = 52,000 – 30,000 = 22,000
Profit on disposal = 35,000 – 22,000 = 13,000.
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