On 1 June 20X9 a machine was sold which cost $20,000 on 31 July 20X5. The sale proceeds were $5,500. The depreciation policy for machinery is 20% pa straight line, with a full year being charged in the year of acquisition and none in the year of disposal. The year-end is 31 December. What is the profit or loss on disposal? A Profit $834 B Loss $834 C Profit $1,500 D Loss $1,500
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.
On 1 June 20X9 a machine was sold which cost $20,000 on 31 July 20X5. The sale proceeds were $5,500.
The
acquisition and none in the year of disposal. The year-end is 31 December.
What is the profit or loss on disposal?
A Profit $834
B Loss $834
C Profit $1,500
D Loss $1,500
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