Asset disposal firms will often sell or scrap a non

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Asset disposal Firms will often sell or scrap a non-current asset before the end of its useful life. Given that the revenue received from selling an asset would be classified as a capital receipt it cannot be included as revenue towards the profit. However, the profit or loss on the sale would be included as either revenue income or a revenue expense depending on whether a profit or loss was made.
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Example Yeates Ltd has the following balances on its accounts in respect of machinery and its depreciation: 31 December 2011: Machinery £21,000, Provision for depreciation of machinery £8,600. The firm then makes the following purchases of machinery: 2012 Jan 1 £10,000 2012 Jun 30 £12,000 2013 Mar 31 £16,000 2014 Sep 30 £20,000 Machinery is depreciated using straight line at a rate of 25% on cost and is provided on a monthly basis. On 31 March 2015, machinery purchased for £6,000 on 1 July 2011 is sold for £300.
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Show the following : (a) Machinery at cost account for the years ended 31 December 2012 to 2015 (b) Provision for depreciation of machinery account for the years ended 31 December 2012 to 2015 (c) Machinery disposal account for the year ended 31 December 2015 (d) Statement of financial position extract for machinery as at 31 December 2015.
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  • Summer '17
  • dr. kipanga
  • Depreciation, Generally Accepted Accounting Principles

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