ACCA FA · Chapter 6 · Question 5 of 12
A company with a 31 December year end bought a machine on 1 January 20X2 for $60,000. It is depreciated at 10% per year on cost, with a full year's charge in the year of acquisition and none in the year of disposal. The machine was sold on 30 June 20X6 for $33,500. What is the profit or loss on disposal?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) Loss of $2,500
Explanation
Depreciation is charged for 20X2, 20X3, 20X4 and 20X5 only: 4 x ($60,000 x 10%) = $24,000. Carrying amount at disposal = $60,000 - $24,000 = $36,000. Proceeds $33,500 - carrying amount $36,000 = loss of $2,500. Charging five years gives a profit of $3,500, and time-apportioning to June gives a profit of $500.
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