BMC Co purchased a car 65900
for $20000 on 1 april 20x5 which has been depreciated at 10% each year straight line, assuming no residual value. BMC Co's policy is to charge a full year's depreciation in the year of purchase and none in the year of disposal. The car was traded in exchange of new car 45600 with cash payment of $15000 from MBC
Traders on 28 February 20y2.MBC valued the car 65900 UNDER PEA trade allowance of $7000. What was the the profit or loss on disposal of the car 65900 for the year ended 31 december 20?2?
$13000 loss
$1000 profit
$14000 loss
$1000 loss
Sir , please help me with this question ?
I am so confused in 20x5 and 20y2 .
How take depreciation ?? Can you solve this question or give me some ideas how to solve ?
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Depreciation and disposal
3y ago#1The cost of the car was $20,000 and so the depreciation will have been $2,000 per year for each of the years to 31 December X5, X6, X7, X8, X9, Y0 and Y1. So a total of 7 years giving accumulated depreciation of $14,000 and therefore a written down value of $6,000.
It was exchanged for a new car for which they paid $15,000 and an allowance of $7,000 for the old car. That means that the cost of the new car was $22,000 and they were effectively getting $7,000 for the old car.
So the profit on sale of the old car was $7,000 - $6,000 = profit of $1,000.
Have you watched my free lectures on this?
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