Trial balance extracts at 30 September 2019
$’000
Land at cost on 30 September 2018 50,000
Plant and equipment at cost 76,600
Accumulated depreciation at 30 September 2018
Plant 24,600
Capitalised development expenditure at 30 September 2018
20,000
Non-current assets – tangible:
The land was acquired on the 30 September 2018. The company’s
policy is to revalue its land at each year end and at 30 September
2019 it was valued at $53 million.
On 1 October 2018 an item of plant was disposed of for $2.5 million
cash. The proceeds have been treated as sales revenue by the
business. The plant is still included in the above trial balance
figures at its cost of $8 million and accumulated depreciation of
$4 million (to the date of disposal).
All plant is depreciated at 20% per annum using the reducing
balance method.
Depreciation and amortisation of all non-current assets is charged
to cost of sales.
Non-current assets – intangible:
In addition to the capitalised development expenditure (of $20
million), further research and development costs were incurred on a
new project which commenced on 1 October 2018. The research stage
of the new project lasted until 31 December 2018 and incurred $1.4
million of costs. From that date the project incurred development
costs of $800,000 per month. On 1 April 2019 the directors became
confident that the project would be successful and yield a profit
well in excess of its costs. The project is still in development at
30 September 2019.
Capitalised development expenditure is amortised at 20% per annum using the straight-line method. All expensed research and development are charged to cost of sales.
The profit or loss on disposal amounted to ………………………………………
There is only one question asked about the profit or loss on disposal of asset amounted to _____
Cost of Disposed plant & Machinery = $8 milion
Accumulated depreciation on such Plant and Machinery till the date of disposal = $4 million
Book value/Carrying value on date of disposal = $4 million
Sold at $2.5 million
Loss = $4 million - $2.5 million = $1.5 million
Note :
Only this one question is asked, there is no other question. All the data given in this question except the plant & machinery details are irrelevant for this question.
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