A non-current asset of a business cost $300000 in 2021. It is depreciated using the reducing balance method at the rate of 40% per annum. A full year's depreciation is provided in the year of acquisition but none in the year of sale. The financial year of the business ends on 31 December.

In 2023, the item was sold for $150000. Disposal costs of $15000 were incurred.

What was the profit on disposal?

Q: What topic does this question test?

This question tests Accounting for Non-Current Assets in A-Level Accounting (syllabus code 9706). It is worth 1 mark.

Q: Which exam paper is this question from?

This question appeared in the Cambridge A-Level Accounting Oct/Nov 2023 examination, Paper 1 Variant 2 (9706_w23_qp_12.pdf).

Question

A non-current asset of a business cost $300000 in 2021. It is depreciated using the reducing balance method at the rate of 40% per annum. A full year's depreciation is provided in the year of acquisition but none in the year of sale. The financial year of the business ends on 31 December.

In 2023, the item was sold for $150000. Disposal costs of $15000 were incurred.

What was the profit on disposal?

Oracle Prep · Accepted Answer

The correct answer is A: $27000.

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