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ACCA Applied Knowledge · Financial Accounting · Tangible non-current assets

Delta Co sold a vehicle for $9,000. It had cost $30,000 and had accumulated depreciation of $22,500 at the date of disposal (depreciation to the disposal date already charged). What is the entry to record the profit or loss on disposal?

Delta Co makes a profit on disposal of $1,500, credited to profit or loss. The carrying amount is cost of $30,000 less accumulated depreciation of $22,500, giving $7,500, and the sale proceeds of $9,000 exceed this carrying amount by $1,500.

  1. AProfit of $1,500 credited to profit or lossCorrect
  2. BLoss of $1,500 debited to profit or loss
  3. CProfit of $9,000 credited to profit or loss
  4. DLoss of $21,000 debited to profit or loss

Explanation

Carrying amount = 30,000 - 22,500 = $7,500. Proceeds 9,000 - 7,500 = profit of $1,500. A loss of $1,500 reverses the sign; comparing proceeds with cost gives a loss of $21,000, which ignores accumulated depreciation.

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