ROI

At the end of 20X1, an investment centre has net assets of $1m and annual operating profits of $190,000. However, the bookkeeper forgot to account for the following: A machine with a net book value of $40,000 was sold at the start of the year for $50,000 and replaced with a machine costing $250,000. Both the purchase and sale are cash transactions. No depreciation is charged in the year of purchase or disposal. The investment centre calculates return on investment (ROI) based on closing net assets. Assuming no other changes to profit or net assets, what is the return on investment (ROI) for the year? Solutuions: Revised annual profit = $190,000 + $10,000 profit on the sale of the asset = $200,000 Revised net assets = $1,000,000 – $40,000 NBV + $50,000 cash – $250,000 cash + $250,000 asset = $1,010,000 ROI = ($200,000/$1,010,000) x 100 = 19·8% my question: Why are we adding the whole sales value back to net asset and at the same time recording 10k on the profit acct? the asset is to be removed as we make the sales disposal with a bal of $960K and add and subtract the replacement amt of $250 assuming the cash was from the net asset . Are we not overstating the net asset ?