PRC-1 · Chapter 6 · Question 84 of 100
A 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 record this transaction must include a:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) Credit to gain on disposal for Rs. 4,000.
Explanation
Carrying amount = 50k - 40k = 10k. Proceeds = 14k. Gain = 14k - 10k = 4k. A gain is a credit to the P&L (or Disposal) account.
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