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ACCA Applied Knowledge · Financial Accounting · Statement of profit or loss and other comprehensive income

Drayton plc sells a vehicle for $7,500 during the year. The vehicle cost $20,000 and had accumulated depreciation of $11,000 at the date of disposal. What is the result of the disposal in profit or loss?

There is a loss on disposal of $1,500. The vehicle's carrying amount was $9,000 (cost $20,000 less accumulated depreciation $11,000), and it was sold for $7,500. Because proceeds are lower than carrying amount, the difference is recognised as a loss in profit or loss.

  1. ALoss of $1,500Correct
  2. BGain of $1,500
  3. CLoss of $12,500
  4. DGain of $7,500

Explanation

Carrying amount is 20,000 - 11,000 = 9,000. Proceeds are 7,500. Proceeds below carrying amount give a loss of $1,500. A gain of $1,500 reverses the sign.

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