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The profit on disposal of plant is deducted from cost of sales. I found this in 2 different qns. Why they treat like this?
Did you pass paper F3?
A profit on plant disposal arises because we have depreciated the plant too much. Depreciation ( often ) is expensed through cost of sales. If we have depreciated too much, the resultant profit should also go to reduce the cost of sales.
Incidentally, a loss on disposal would be the opposite – it arises because we didn’t depreciate the asset enough and if, as is common in an exam question, Steve Scott says all depreciation should be included as a cost of sales, then any loss on disposal should also be included in cost of sales
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