Adebola deliver service uses two delivery vans. Her business policy is to replace the vans every 4 years. One of the vans which was bought 4-years ago at a cost of £12,750, is due for replacement. Adebola depreciates the vans using the reducing balance methods at a rate of 25% per annum. She accepts an offer of £3,650 for the van. What is Adebola’s profit or loss on the sale of the Van after year 4?
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.
Adebola deliver service uses two delivery vans. Her business policy is to replace the vans every 4 years. One of the vans which was bought 4-years ago at a cost of £12,750, is due for replacement. Adebola
What is Adebola’s profit or loss on the sale of the Van after year 4?
Step by step
Solved in 2 steps
