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Hi
Perhaps you can help sort out the answer to this question as I don’t agree or perhaps understand how the answer was arrived at.
A non-current asset was disposed of for 2000 during the last accounting year. It had been purchased exactly three years earlier for 5000 with an expected RV of 500 and had been deprecated on the RB basis of 20% per annum.
The profit/loss was
360 loss
150 loss
104 loss
200 profit.They give 360 as the correct answer, however when you carry the numbers forward you arrive at 2440 and surely the selling price (2200-2440) minus the carry forward would give you a 240 loss?
Any thoughts or I am missing something (the RV of 500, but how do you account for it under the RB method)
I don’t know how you arrived at 2,440.
If you depreciate 5,000 for 3 years at 20% reducing balance, you come to 2,560.
The sale proceeds were 2,200 (I assume you mistyped in the question) and therefore there is a loss of 360.
Expected sale proceeds are irrelevant when using the reducing balance method.
But, Year 1 is 5000*0.20=1000
Year 2 is 4000*0.20= 800
Year 3 3200*0.20=640= 2440…Where am I going wrong?
Thanks
FORGET, FORGET!! Actually see the problem now. I never took the last 640 off 3200!! I thought I was going mad because I’ve done it loads of time and got the right answer. Was doing too many questions in one go.
Thanks again
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