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- This topic has 7 replies, 3 voices, and was last updated 8 years ago by John Moffat.
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- May 8, 2015 at 9:32 am #244770
Can you help with this question please
Your firm bought a machine for $5,000 on 1 January 20X1, which had an expected useful life of four years and an expected residual value of $1,000; the asset was to be depreciated on the straight-line basis. The firm’s policy is to charge depreciation in the year of disposal. On 31 December 20X3, the machine was sold for $1,600.
What amount should be entered in the 20X3 statement of profit or loss and other comprehensive income for profit or loss on disposal?
A Profit of $600
B Loss of $600
C Profit of $350
D Loss of $400
The answer given by BPP is (D) but mine answer is (A).
BPP says carrying amount is $2000 while mine is $3000 because the question says depreciation is charge in the year of disposal. Please, explain. ThanksMay 8, 2015 at 11:28 am #244783There are three years of depreciation: X1, X2, and X3.
The depreciation is 1,000 per year. So the carrying value (net book value) at the date of sales is 5,000 – 3,000 = 2,000.May 13, 2015 at 9:55 am #245670Thank you for the answer and explanation. I appreciate your prompt response. It was my mistake, I was using the three years depreciation amount for carrying amount.
I also like to thank you for your help on other papers, I did my F1 and F2 in March with pass grade, your input at Opentuition can not be underestimated and I am grateful for this.
May 13, 2015 at 11:43 am #245687Thank you for your comments (and congratulations on passing F1 and F2 🙂 )
May 17, 2015 at 1:21 am #246474The plant and equipment account in the records of a company for the year ended 31 december 2006 is shown below.
PLANT AND EQUIPMENT – COST
2006 2006
1 january balance $960,000
1 july Cash $48,000 30 sep transfer disposal account $84,000
31 dec Balance $924,000
————- ———-
$1,008,000 $1,008,000The company’s policy is to charge depreciation on the straight line basis at 20% per year, with proportionate depreciation in the years of purchase and sale.
What should be the charge for depreciation in the company’s statement of profit or loss for the year ended 31 December 2006?
A. $184,800
B. $192,600
C. $191,400
D. $184,200May 17, 2015 at 9:33 am #246514I am puzzled why you are asking for the answer, because presumably the book in which you found the question also has the answers!!
Please in future ask about problems you have with the answer rather than just demanding an answer to the question.From 1 Jan to 30 Jun (6 months) the cost is 960,000, so the depreciation is 6/12 x 20% x 960,000
From 1 July to 30 Sep (3 months) the cost is 1,008,000, so the depreciation is 3/12 x 20% x 1,008,000
From 1 Oct to 31 Dec (3 months) the cost is 924,000, so the depreciation is 3/12 x 20% x 924,000
May 19, 2015 at 3:52 am #247041I’m really sorry sir. It won’t happen again. In the future i’ll ask you about the problems in the questions.
May 19, 2015 at 7:15 am #247059No problem 🙂
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