Paper 2 · November 2014 · Depreciation
Jongwe Limited sold a motor van on 31 December 2009 for $10 000 cash. The van's original cost was $20 000 and the accumulated depreciation on it at the date of sale was $4 000. What was the profit or loss on disposal?
AA profit of $6 000
BA loss of $6 000
CA profit of $4 000
DA loss of $10 000
Explanation
Net book value at disposal = $20 000 - $4 000 = $16 000. Loss on disposal = $16 000 - $10 000 (proceeds) = $6 000 loss.
Derived from ZIMSEC Principles of Accounts 7112/2 Paper 2, November 2014 Specimen Paper, Q2