PRC-1 · Chapter 6 · Question 78 of 100
A business purchased an asset for Rs. 600,000. Accumulated depreciation is Rs. 240,000. It was sold for Rs. 430,000 cash. When posting to the Disposal T-account, what is the balancing entry to close the account?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) Debit Disposal Rs. 70,000 (Gain)
Explanation
Carrying amount = 600k - 240k = 360k. Proceeds = 430k. Gain = 70k. In the Disposal account, Debits = Cost (600k). Credits = Acc Dep (240k) + Cash (430k) = 670k. To balance, a Debit of 70k is needed, representing the transfer of Gain to the Profit or Loss account.
More Property, Plant and Equipment MCQs
- Q80If an asset's unadjusted trial balance shows an 'Accumulated Depreciation' balance of Rs. 40,000, this figure represents:
- Q81Which of the following actions constitutes an 'Error of Principle' regarding Property, Plant, and Equipment?
- Q82A company buys a non-current asset for Rs. 100,000. It intends to use it for 10 years and expects a residual value of Rs. 10,000. After 4…
- Q83When calculating the initial cost of a manufactured machine, pre-production testing was required. The testing cost Rs. 8,000, and the…
- Q84A company sells a machine for Rs. 14,000. It originally cost Rs. 50,000 and had been depreciated by Rs. 40,000. The journal entry to…