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Can anyone help explain the answer to the above question.
I get the first part
cost 100,000 less 4 years of depreciation of 40,000 which leaves 60,000 and it was sold for 65,000 which leaves a profit of 5000.
but it is the bottom bit which i don’t understand
100,000
(40,000)
60,000 profit 5000 65,000
8000 9000
52,000 1000xs dep 56000so journals are:
debit RE 4000
credit TNCA 4000if anyone could explain where the 8000 and 9000 figures come in that would be great.
Thanks
It’s residual value was re-assessed at the date of transfer to 20,000. So, if it had not been sold, depreciation would have been (60,000 – 20,000) / 5 = 8,000pa
When it is sold and residual value reassessed, the depreciable amount becomes 65,000 – 20,000 = 45,000 and that’s the figure we are now depreciating over 5 years = 9,000 pa
So, unrealised profit of 5,000 less (excess) depreciation of 1,000 gives a net pup adjustment of just 4,000
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Now I understand!
Thank you for the explanation.
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