Question

On 31 March 2019 dixie’s business traded-in a machine （a Z-15model）which it had originally purchased on 1 April 2016 for £19,000. Dixie had depreciated the Z-15 at 10% per annum using the straight-line method. Dixie part-exchanged the Z-15 for a newer model (the Z-18). The vendor's list price for the Z-18 was £32,000 but Dixie only paid £20,000 plus the trade-in in full settlement.

Required: What was the profit or loss on the disposal of the Z-15 in Dixie's Income Statement for the financial year to 31 March 2019?

Answer 1

	Profit or loss:
	Cash paid	20000
	Old machine given	19000
	Less:new machine recd.	-32000
	Less:depreciation benefits	-5700
	Loss on exchange of machine	1300
Journal entry:
Date	Acc. Titles	Debit $	Credit $
31-Mar-19	Machine Z-18	32000
	Acc. Depre.	5700		1900*3
	Loss on exchange of machine	1300
	Machine Z-15		19000
	Cash		20000
	(loss on exchange of Z-15 with Z-18)
Profit or loss:
Loss on disposal of Z-15 is $1300