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a company has year end 31 jan each year. the purchase of car for $12000 on 1 jan 2008 and sold it for $5000 31 march 2012.
depreciation policy is to charge 12% reducing balance method with full year charge of purchase none in the of year sale.
its opentution.com mock exam Q. am not getting correct ans.I think you have copied the question wrongly. The depreciation is 20% reducing balance (not 12%).
Because the year end is 31 January and the asset was bought on 1 Jan 2008, there is depreciation for years ended 31 January 2008, 2009, 2010, 2011 and 2012. (It was sold in year ended 31 January 2013, so no depreciation for that year,
So…..there are 5 years of depreciation at 20% reducing balance. This means that the net book value (carrying value) at the date of sale is 3932.16
It was sold for 5000, so there is a profit on sale of 1067.84Hope that makes it clear 🙂
10x sir. yah my bad, did copied wrongly. actually i didn’t calculate depreciation for 2008, i thought year end 31 jan so, it bought 1st jan 2008 dep don’t hav to calculate. 10x…
it sold 31 march 2012 not in 2013,year end 31 st jan, is that’s why, have to calculate depreciation for 2012?
The date of sale is during the year ended 31 January 2013 (it is between 1 February 2012 and 31 January 2013)
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