Full Year Method:

1. Calculate the annual depreciation: £1,200,000 / 4 years = £300,000 per year.

2. Calculate the depreciation for the first year: Since the purchase date is
January 1st, 2015, and the year-end is September 30th, 2017, we need to
consider 2 full years and 9 months of depreciation. Depreciation for the first year
= £300,000/year * 2 years = £600,000.
3. Calculate the depreciation for the second year (until exchange
date): Depreciation for the remaining months of the second year =
£300,000/year * (9 months/12 months) = £225,000.
4. Calculate the book value at the exchange date: Book value = £1,200,000 -
£600,000 - £225,000 = £375,000.
5. Calculate the gain or loss: Gain/loss = (£850,000 + £30,000) - £375,000
= £505,000 gain.

Monthly Method:

1. Calculate the monthly depreciation: £1,200,000 / (4 years * 12 months) =

£25,000 per month.
2. Calculate the depreciation for the first year: Same as the full year method, 2
full years = 24 months. Depreciation for the first year = £25,000/month * 24
months = £600,000.
3. Calculate the depreciation for the second year (until exchange
date): Depreciation for the remaining months of the second year =
£25,000/month * (9 months) = £225,000.
4. Calculate the depreciation for the third year (until exchange
date): Depreciation for the months in the third year = £25,000/month * (4
months) = £100,000.
5. Calculate the book value at the exchange date: Book value = £1,200,000 -
£600,000 - £225,000 - £100,000 = £275,000.
6. Calculate the gain or loss: Gain/loss = (£850,000 + £30,000) - £275,000
= £605,000 gain.

Therefore, under the full year method, the company had a gain of £505,000, while
under the monthly method, the gain was £605,000.