Disposal of Non-Current Assets Flashcards
1
Q
What is a profit on disposal?
A
It is sundry income.
Sale Proceeds > Carrying Amount
2
Q
What is a loss on disposal?
A
It is an expense on the profit and loss.
Sale Proceeds < Carrying Amount
3
Q
What are the steps of disposing of an asset?
A
1) Remove the cost of the asset and post to the disposal.
2) Remove the accumulated depreciation and post to the disposal.
3) Account for the sale proceeds.
4) Balance off the disposal to see a profit or a loss.
4
Q
What is part exchange?
A
When instead of receiving cash proceeds you could get a part exchange allowance on an old asset.
5
Q
What are the journal entries for a part exchange?
A
Dr New machine with the value of the part exchange.
Cr Disposal with the value of the part exchange.
