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John Moffat.
John Moffat.-
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kavishabrito
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The suspense account is made up of two items:
(a) The proceeds of the issue of 4,000,000 50c shares at $1.10 per share, credited to the suspense account from the cash book.
(b) The balance of the account is the proceeds of the sale of some plant on 1 January 20X4 with a carrying amount at the date of sale of $700,000 and which had originally cost $1,400,000. No other accounting entries have yet been made for the disposal apart from the cash book entry for the receipt of the proceeds. Depreciation on the plant has been charged at 25% (straight-line basis) in preparing the draft statement of financial position without allowing for the sale. The depreciation for the year relating to the plant sold should be adjusted for in full.
Q. What is the profit or loss on disposal of the plant?
John Moffat
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Please do not copy out full questions like this because they are copyright of BPP and therefore they should not be posted on our website (and you have not typed up everything anyway because you have missed out the fact that the balance on the website is $5,000,000! I have the BPP Revision Kit so if you have any more problems you just need to tell me the number of the question and which bit of the answer is giving the problem.
Since (from (a)) 4,400,000 has been credited to the suspense account, and since the balance on the suspense account is 5,000,000, the remaining 600,000 relates to (b) and must be the sale proceeds.
The carrying value of the asset sold was 700,000 at the date of sale, and therefore there is a loss on sale of $100,000.
kavishabrito
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