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Hello Sir,
Could you please help me with this question?
Card Co owns a warehouse. It was purchased 30 years ago for 300,000 and is depreciated on a straight line basis over 50 years. At 1st January 20×4 when the warehouse still had an estimated useful life of 20 years, Card Co decided to revalue the warehouse to it’s fair value of 400,000. Following the decision to revalue the warehouse , Card Co decided to make the annual transfer of excess depreciation. Card Co disposed of the warehouse on 31st December 20×9 for 500,000.
what was the profit on disposal for the warehouse for inclusion in the financial statements for the year ended 30th December 20×9?
Answer per test kit: They have given the final answer as 280,000. But the workings show profit on disposal as 320,000.
when I initially solved the question, I got 220,000 as my profit on disposal.
Sir, could you please help me to understand which answer is correct and how to approach it? I thought it was straightforward, however maybe my answer is wrong because I didn’t take into consideration the annual transfer?
Thank You!
Please can you double check that you have copied everything in the question correctly, because I do not think that any of the answers you quote are correct?
(Does your kit show the workings for their answer?)
Hello,
Yes I’ve copied the question exactly as given in the book.
The workings they’ve shown are as follows:
Revalued amt at 1st Jan 20×4. 400,000
Depreciation charge.(6years to disposal) 120,000
Carrying amount – 180,000
Disposal proceeds 500,000
Profit 320,000But, the final answer at the top shows a profit of 280,000 in the book.
Im very confused with this question.
The answer I got was 220,000.
Would really appreciate your help..
The answer is 220,000, and it does seem as if your book has some typing problems 🙂
The carrying amount in the answer is not 180,000, it is 400,000 – 120,000 = 280,000.
Therefore the profit is 500,000 – 280,000 = 220,000
Thank you so much Sir!! I was so confused, cause I thought it pretty straightforward.
Much appreciated!
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