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Please help me these question as I’m not getting the answer correct
1) At 31 October 2013 a business had machine with a cost of 120000 and with accumulated depreciation 25000.
On 1 Jan 2014 they sold a machine for 10000. This machine had originallly cost 30000. On 1 April 2012 the business had a depreciation policy of charging straight line method @ the rate 20% per annum, on monthly basis. Which is depreciation expense for the year ended 31 Oct 2014?2) A co has a year end of 31 Jan each year they purchased a car for 12000 on 1 Jan 2008,& sold it for 5000 on 31 March 2012. Their depreciation policy is to charge 20% reducing balance with a full year’s charge in the year of purchase & none in the year of sale. What was the profit or loss on the sale of the car??
Question1:
From 1 November to 31 December (2 months) the machines cost $120,000. So the depreciation for this period is 2/12 x 20% x $120,000 = $4,000
From 1 January to 31 October (10 months) the machines cost $90,000 (120,000 – 30,000) so the depreciation for this period is 10/12 x 90,000 x 20% = $15,000
So total depreciation = $19,000
Question 2:
There will be depreciation for years ended 31 Jan 2008, 2009, 2010, 2011, and 2012. (The year of sale is year ended 31 Jan 2013, but there is no depreciation in the year of sale).
At 20% reducing balance, the book value after 5 years depreciation will be 3932.16.
So the profit on sale is 5,000 – 3932.16 = 1,067.84
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