A machine was bought on 3rd October 2015 for $20,000. It was sold for cash for $10,000 on 2nd January 2019. The machine had been depreciated at 12% on cost. Depreciation is charged proportionately for the period the asset is used during the year of purchase with no depreciation charged during the year of disposal. Required: Determine how much the loss or gain on disposal of the machine was.
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
A machine was bought on 3rd October 2015 for $20,000. It was sold for cash for $10,000 on 2nd January 2019. The machine had been
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