ACCA Applied Knowledge · Financial Accounting · Statement of profit or loss and other comprehensive income
Kappa Co sold a vehicle for $7,500. It had cost $24,000 and accumulated depreciation at the date of disposal was $15,000. What is the profit or loss on disposal to be recognised in profit or loss?
There is a loss of $1,500. The carrying amount at disposal is cost $24,000 less accumulated depreciation $15,000, which is $9,000. Proceeds of $7,500 are $1,500 lower than this, so the difference is a loss recognised in profit or loss.
- ALoss of $1,500Correct
- BProfit of $1,500
- CProfit of $7,500
- DLoss of $16,500
Explanation
Carrying amount = 24,000 - 15,000 = 9,000. Proceeds 7,500 less carrying amount 9,000 = loss of 1,500. A profit of 1,500 reverses the sign. Comparing proceeds to cost gives the loss of 16,500, which is wrong.
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