A company purchases a machine with an expected useful life of 6 years for $12,000. After two years of use, management revised the expected useful life to 8 years. The machine is to be depreciated at 30% per annum on the reducing balance basis. A full year's depreciation is charged in the year of purchase, with none in the year of sale. During year 4, it is sold for $8,000.
What is the profit or loss on disposal?
Suggested solutions:
| YEAR | COST | DEPRECIATION | BALANCE |
| 1 | 12,000 | 3,600 | 8,400 |
| 2 | 8,400 | 2,520 | 5,880 |
| 3 | 5,880 | 1,764 | 4,116 |
| Total Depreciation | 7,884 |
| Disposal | 8,000 |
| Carrying value | 4,116 |
| Profit(loss) | 3,884 |
To do the same topic again in ACCA F3 profit or loss on disposal