Day: March 6, 2021

On 1 October 2018, a company purchased machinery for £26,000 whose year-end is 31 December.

It was decided to depreciate the asset using the reducing balance method at a rate of 20% per annum in the year of acquisition and none in the year of disposal.

On 30 September 2020 the asset was sold for £12,000. 

What is the profit or loss on disposal?

Select ONE answer:

1. £3,600 loss
2. £3,600 profit
3. £4,640 loss
4. £4,640 profit

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 3

1. Not correct
2. Not correct
3. Correct = £26,000 * 0.8 * 0.8 = £16,640 – £12,000 = £4,640 Loss
4. Not correct

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