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Artur bought a car on 1 January 2012 for $10,000. On 1 July 2014 he accepted $3,500 tradein allowance on a new car. The new car cost $12,000. Artur depreciates all non-current
assets at a rate of 25% per annum on cost at the year end. He prepares accounts to 31
December each year.
What is the resulting under/over allowance for depreciation on the sale of the first car?
A Under allowance of $1,500
B Over allowance of $1,500
C Under allowance of $5,000
D Over allowance of $5,000Could you please help me with this question?
Why are you attempting a question for which you do not have an answer? You should be using a Revision Kit from one of the ACCA Approved Publishers – they have answers and explanations!!
Also, this is not an exam type question – we do not take about under or over allowances for depreciation.
The first car will have been depreciated for two years and so will have a net book value of $5,000. It is sold for $3,500 and therefore the depreciation has been under allowed by $1,500 and there is a profit on sale of $1,500.
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