Malfoy Ltd sold a motor vehicle on 30 September 2014. The proceeds from sale were $21,000 cash. The Balance Sheet as at 30 June 2014 reported the motor vehicle at a cost of $45,000 and the accumulated depreciation was $21,600. The motor vehicle is depreciated using the straight-line method at a rate of $5,400 per annum. 'A profit or loss on sale of a non-current asset is simply an over or understatement of depreciation'. Using the information given above, prepare calculations to support your explanation of the statement.

Malfoy Ltd sold a motor vehicle on 30 September 2014. The proceeds from sale were $21,000 cash. The Balance Sheet as at 30 June 2014 reported the motor vehicle at a cost of $45,000 and the accumulated depreciation was $21,600. The motor vehicle is depreciated using the straight-line method at a rate of $5,400 per annum. 'A profit or loss on sale of a non-current asset is simply an over or understatement of depreciation'. Using the information given above, prepare calculations to support your explanation of the statement.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Q: A company which uses the revaluation model for its PPE bought a building on 1 January 2014 for…

A: In the given question, we need to compute the revaluation loss that would affect the statement of…

Q: In 2015, Zee Tee Inc. acquired production machinery at a cost of $640,000, which now has a…

A: The objective of the question is to calculate the amount that Zee Tee Inc. should recognize as a…

Q: Jurassic Company owns equipment that cost $900,000 and has accumulated depreciatio flows from the…

A: A journal entry is a basic accounting record that is used to chronologically track financial…

Q: Wanda sold an asset for £10,000. The original cost was £23,000. The asset, which had an estimated…

A: The profit or loss from the disposal of the asset represents the difference between sale amount of…

Q: Hand Creamy Limited purchased a land for $150,000 cash on 1 September 2016 and a machine for…

A: a) Depreciation: Machinery = Cost/ life = $300,000/10 years =…

Q: A machine was bought on 3rd October 2015 for $20,000. It was sold for cash for $10,000 on 2nd…

A: Depreciation expense is charged against the cost of long-term physical assets. It is a method of…

Q: Jaguar Ltd purchased a machine on 1 July 2016 at the cost of $640,000. The machine is expected to…

A: (a) Calculate the company’s taxable profit and hence its tax payable for 2017. Particular…

Q: Concord Corporation purchased machinery for $855000 on January 1, 2017. Straight-line depreciation…

A: Straight line method of depreciation is the most straightforward approach that implies that the…

Q: Pharoah Company changed depreciation methods in 2025 from double-declining-balance to straight-line.…

A: The Depreciation is a non-cash expense that allows companies to make provisions for the replacement…

Q: For which of the following statements is it not possible to arrive at an answer due to information…

A: In the reducing balance method, the depreciation expense is calculated as a percentage of the…

Q: Norman Ltd purchased a motor vehicle for $45 000 on 1 July 2015. The vehicle was expected to have a…

A: Reducing balance method: In this Method, A predetermined percentage of Depreciation is charged on…

Q: Mazaya Company purchased a piece of equipment on January 1, 2010. The equipment cost R.O.80,o00 and…

A: Double declining depreciation rate = Straight line depreciation rate x 2 = (100/8 years) x 2 = 25%

Question

Malfoy Ltd sold a motor vehicle on 30 September 2014. The proceeds from sale were
$21,000 cash. The Balance Sheet as at 30 June 2014 reported the motor vehicle at a cost of
$45,000 and the accumulated depreciation was $21,600. The motor vehicle is depreciated
using the straight-line method at a rate of $5,400 per annum.
'A profit or loss on sale of a non-current asset is simply an over or understatement of
depreciation'.
Using the information given above, prepare calculations to support your explanation of the
statement.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step 3

VIEW

Step by step

Solved in 3 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

Ashvinn
Shamrock Inc. owns equipment that cost $605,000 and has accumulated depreciation of $157,000. The expected future net cash flows from the use of the asset are expected to be $400,000. The fair value of the equipment is $346,000. Prepare the journal entry, if any, to record the impairment loss. (If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit
During 2015, XYZ Enterprises sold a piece of machinery, which originally cost $40,000, for $12,000. This sale resulted in a gain of $2,000. Also during 2015, XYZ's Accumulated Depreciation account (for all fixed assets) increased from $200,000 to $210,000. How much did XYZ report as Depreciation Expense for 2015 (for all fixed assets)? There were no fixed asset impairments during 2015.
Windsor Company owns equipment that cost $972,000 and has accumulated depreciation of $410,400. The expected future net cash flows from the use of the asset are expected to be $540,000. The fair value of the equipment is $432,000.Prepare the journal entry, if any, to record the impairment loss. (If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit enter an account title enter a debit amount enter a credit amount enter an account title enter a debit amount enter a credit amount
Jaguar Ltd purchased a machine on 1 July 2016 at the cost of $640,000. The machine is expected to have a useful life of 5 years (straight-line basis) and no residual value. For taxation purposes, the ATO allows the company to depreciate the asset over 4 years.The profit before tax for the company for the year ending 30 June 2017 is $600,000. To calculate this profit the company has deducted $60,000 entertainment expense, and $80,000 salary expense that has not yet been paid. Also the company has included $70,000 interest as income that the company has not yet received. The tax rate is 30%.Required: (c) Prepare the necessary journal entries on 30 June 2017. (3 marks)
Baltika plc purchased a van on 1 November 2020 for a total cost of £28,000 by paying £21,500 cash and trading in an old van. The old van had cost £25,000 and the related accumulated depreciation was £17,500. What is the profit/loss on disposal of the old van in Baltika plc's statement of profit or loss for the year ended 31 December 2020?