AAT Level 3 Diploma in Accounting

Disposal of non-current assets

Harris Incorporated purchased a machine on 1 January 20X6 for £15,000 paying by cheque.
This was depreciated using the straight line method at a rate or 20% per annum.
On 31 December 20X8 the machine was sold for £5,000.

What is the depreciation charge for the year?

What is the cost of the machine purchased?

What is the accumulated depreciation figure?

How much profit or loss did you make?

Write up the following accounts:-

Machine at cost account

Accumulated depreciation

Disposals
Two businesses each purchase a machine on 1 August 20X6 for £3,600.
Both businesses have an accounting period which runs from 1 January to 31 December
Both businesses sell their assets on 31 October 20X8 for £ 2,800

Business A depreciates its machinery at 10% straight line basis with a full year’s charge in the year of
acquisition and none in the year of disposal

Business B depreciates its machinery at 10% per annum on a straight line basis.

What is the profit or loss on disposal for each business?

BUSINESS A BUSINESS B

Cost

Depreciation –
Y/E: 31 December 20X6

Y/E: 31 December 20X7

Y/E: 31 December 20X8

___________ _____________

Carrying Amount

Less Sales Proceeds

___________ _____________

PROFIT OR LOSS
___________ _____________
PART EXCHANGE

Harris Incorporated is buying a car with a list price of £12,000

The dealer agrees to take the old car in part exchange with a part exchange allowance of £3,800

The old car cost £13,500 on 1 January 20X6

At the date of disposal, 30 June 20X8, the accumulated depreciation was £9,250

What is the profit or loss on disposal of the old car?

How much cash should be paid for the new car?

Motor vehicle at cost

Motor vehicle accumulated depreciation

Disposals