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Disposal of asset

Forums › ACCA Forums › ACCA FA Financial Accounting Forums › Disposal of asset

  • This topic has 3 replies, 3 voices, and was last updated 13 years ago by Sangria9.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • April 25, 2012 at 7:58 pm #52367
    queeenshana
    Member
    • Topics: 25
    • Replies: 20
    • ☆

    Sommersault Plc bought an asset three years ago costing 230,000. Total useful life estimated at time of recognition was 5 years. After 1 yr of its operation asset was revalued and a surplus was recorded. Current value in the revaluation surplus account is 45,000.

    During the yr asset was sold for 180,000.
    What is the gain on disposal of asset?

    April 26, 2012 at 2:15 am #96808
    queeenshana
    Member
    • Topics: 25
    • Replies: 20
    • ☆

    I worked it out and got a gain of $880. Could you please try the question and see if that’s correct.

    April 26, 2012 at 5:18 am #96809
    Najiya
    Member
    • Topics: 1
    • Replies: 94
    • ☆☆

    Asset is recorded at a cost of $230,000. Depn under straight line method is 230,000/5 =46,000 per annum.
    first year depreciation charged as $46,000.
    Qn says, the asset was revalued after 1yr and revaluation surplus $45,000.
    Entry is as follows:
    Dr.Accumulated Depreciation $46,000
    Cr. Revaluation Reserve $45,000
    Cr. Asset (balancing figure) $1,000

    Now, the asset is shown in the books at $230,000 – $1,000 = $229,000. Remaining life 4yrs.
    Depreciation = $229,000/4 = $57,250 per annum.
    Accumulated depreciation is now zero for this asset.
    Depreciation charged as $57,250 in yr2 & yr 3. Now, accumulated depreciation is $57,250 * 2 (for 2 yrs) = $114,500.

    In the 4th yr, asset is sold.
    Entries for disposal.
    1)Dr. Disposal a/c $229,000
    Cr. Asset $229,000

    2)Dr. Accumulated Depreciation $114,500
    Cr. Disposal a/c $ 114,500

    3)Dr. Cash/ Bank $180,000
    Cr.Disposal a/c $180,000

    4)Dr.Disposal a/c $65,500
    Cr. Gain on Disposal (I/S) $65,500
    (balancing figure)

    I think, u got the answer as $88,000. This is without taking into consideration the revalued amount of the asset for depreciation calculation. Once the asset is revalued, depreciation should be based on the revalued amount.

    Hope it helps

    May 13, 2012 at 3:12 pm #96810
    Sangria9
    Member
    • Topics: 25
    • Replies: 285
    • ☆☆☆

    Don’t we need to take into account in calculating of balancing figure sum of revaluation surplus?
    I have additional transactions:
    Dr Revaluation surplus $45,000
    Cr Disposal $45,000

    So balancing figure will be: $65,500+$45,000 = $110,500 ??

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