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Ed’s year end is 30 September. he depreciates office furniture at 15% p.a on the straight line basis. a full year’s depreciation is charged in the year an assets is purchased, and no depreciation is charged in the year it is sold.
in march 2005 Ed bought office furniture for $80000.
if he sells the office furniture for $39000 in july 2008, what will be Ed’s profit or loss on disposalA. a profit of $7000
B.a loss of $7000
C.a profit of $5000
D.a loss of $5000Are you asking me a question?
The profit or loss is the difference between the sale proceeds (39,000) and the net book value at the date of sale.
The depreciation is 15% straight line, so 15% of cost of 80,000 which is 12,000 a year.
There is a full years depreciation in the year of purchase and none in the year of sale, and so there will have been 3 years of depreciation (2005, 2006 and 2007).So the net book value is 80,000 – (3 x 12,000) = 44,000.
You should be able to finish it off yourself now 🙂
Yes it is a question..thanks actually I had forgotten to take the year into consideration thanks for you help =)
2001 – 1 january balance 240000
30 june cash – purchase of vans
31 march disposal account 60000
31 dec balance 340000
Brought forward accumulated dep at 1 jan 2001 was 115000. The truck disposed of an 31 march had a carryng value 20000
The company policy tocharge dep 20% per year reducing balance a d charge full year depreciation in the year of acqusition a none in the year of disposal . What is depr31 dec 2001
ButMy question is
Why we apply 20 % not to 60000 but to 20000
2.why we apply 20 % not to 240000 but to 240000-115000Reducing balance depreciation is always applied to the carrying value (net book value), not to the original cost.
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