Week 3 - Disposals

Question 1

What is the formula for calculating the profit/loss on a disposal?

Answer 1

Sale proceeds - net book value

Question 2

How do we calculate net book value?

Answer 2

Cost - accumulated depreciation

Question 3

What 4 double-entry bookkeeping changes do we need to make for a disposal?

Answer 3

• debit cash with sales proceeds
• credit cost of asset
• debit accumulated depreciation
• debit expenses if loss on sale

Question 4

How does the statement of profit or loss change after accounting for the sale/disposal?

Answer 4

The statement of profit or loss now includes a loss on the sale

Question 5

How does the statement of financial position change after accounting for the sale/disposal?

Answer 5

The statement of financial position no longer includes the asset, but will include the cash instead