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A company has a year end of 31 January each year.
They purchased a car for $12,000 on 1 January 2008 and sold it for $5,000 on 31 March 2012.
Their depreciation policy is to charge 20% reducing balance, with a full years charge in the year of purchase and none in the year of sale.What was the profit or loss on the sale of the car ?
A. $84.80 (profit)
B. $1,067.84 (profit)
C. $1,144.00 (loss)
D. $1,854.27 (profit)Sir I chose A. $84.80 (profit) as my answer considering the depreciation policy of the company (no depreciation should be charged in the year of sale which is 2012 in this case).But it tells me that B is the right answer. Could you kindly explain it to me where I went wrong ? Thank you.
Their year end is 31 January, so there will be depreciation charged for y/e 31 Jan 2008; 31 Jan 2009; 31 Jan 2010; 31 Jan 2011; and 31 Jan 2012.
The year of sale was y/e 31 Jan 2013 and there is no depreciation charged for that year.So….5 years depreciation at 20% reducing balance, which gives a net book value / carrying value of 3,932.16 and therefore a profit on sale of 1,067.84
John Moffat wrote:A company has a year end of 31 January each year.
They purchased a car for $12,000 on 1 January 2008 and sold it for $5,000 on 31 March 2012.<br>Their depreciation policy is to charge 20% reducing balance, with a full years charge in the year of purchase and none in the year of sale.</blocs
Solution?John Moffat wrote:Their year end is 31 January, so there will be depreciation charged for y/e 31 Jan 2008; 31 Jan 2009; 31 Jan 2010; 31 Jan 2011; and 31 Jan 2012.
The year of sale was y/e 31 Jan 2013 and there is no depreciation charged for that year.Can you give solution of this?
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