part-exchange allowance

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May 26, 2015 at 2:28 pm #249176
mp-open
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Hallo,
1. If we have part exchange allowance of 21000, new asset acquired at cost 155000, will we depreciate the 155000, or 134000 (155-21)?
2. If, the old asset cost is 120000, acc. depr. 103000, so NBV is 17000, profit on part exchange is 4000 (17-21). Why do we debit the NCA a/c with 155 (134 + 21), and not with 151 (155-4)?
Thank you!
May 26, 2015 at 4:30 pm #249252
John Moffat
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1. You always base depreciation on the full cost – so on 155,000.
2. You debit the asset account with the full cost of 155. The profit on sale will appear in the Statement of profit or loss.
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