Paper 2 · Depreciation and disposal of non-current assets

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

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