DEPRECIATION

A car was purchased by a newsagent business in May 20x0 for: Cost 10,000 Road tax 150 Total 10,150 The business adopts a date of 31 December as its year end. The car was traded in for a replacement vehicle in August 20X3 at an agreed value of $5,000. It has been depreciated at 25% per annum on the reducing balance method, charging a full year’s depreciation in the year of purchase and none in the year of sale. What was the profit or loss on disposal of the vehicle during the year ended December 20X3? A. Profit:$718 B. Profit:$781 C. Profit:$1,788 D. Profit:$1,836 TEXTUAL ANS(A) how is a the ans shoudn't B be the answer since full year dep in year of purchase and no depreciation in year of sale so three years depreciation is 1 year - 2500,2year - 1875,3 year- 1406.25 total depreciation = 5781.25 carraying amount = 10000 - 5781.25 =4218.75 selling price is 5000 so 5000 - 4218.75 = 781.25(781 approx)