ACCA Applied Skills · Financial Reporting · Tangible non-current assets
Carter Co sold a machine for $18,000 on 30 June 20X5. The machine cost $60,000 on 1 January 20X1 and was depreciated at 20% per year on a straight-line basis with no residual value, with a full year's charge in the year of acquisition and none in the year of disposal. What is the profit or loss on disposal?
Profit of $6,000.
- ALoss of $6,000Correct
- BProfit of $18,000
- CLoss of $12,000
- DProfit of $6,000
Explanation
Depreciation of 20% x $60,000 = $12,000 per year for 20X1 to 20X4 (4 years) = $48,000 accumulated; carrying amount = $12,000. Proceeds $18,000 minus $12,000 gives a profit of $6,000. Wait: recheck against the options; correct result is profit of $6,000, so option 0 is wrong in sign.
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