PRC-1 · Chapter 6 · Question 99 of 100
A company buys a vehicle for Rs. 50,000. It expects to sell it for Rs. 10,000 after 4 years. In year 3, the vehicle is destroyed in an accident, and insurance pays out Rs. 22,000. If the straight-line method was used, what is the gain or loss on disposal?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Rs. 8,000 Loss
Explanation
Annual depr = (50k - 10k) / 4 = 10k/yr. After 2 full years, Acc Dep = 20k, WDV = 30k (start of yr 3). Proceeds = 22k. Loss = 8k. (Assuming destroyed at point WDV is 30k).
More Property, Plant and Equipment MCQs
- Q1According to IAS 16, which of the following criteria must be met for an item to be classified as Property, Plant, and Equipment (PPE)?
- Q2Which of the following assets should NOT be classified as Property, Plant, and Equipment?
- Q3At what point should an entity COMMENCE the depreciation of an item of property, plant, and equipment?
- Q4Which of the following costs should be EXCLUDED from the initial capitalized cost of a newly acquired machine?
- Q5How should refundable sales taxes (e.g., input VAT) paid on the purchase of a non-current asset be treated in the accounting records?