Siobhan buys a new van on 1 September 2018 for use in her delivery business. The van cost £22,000 and Siobhan estimates that she will be able to sell the van at the end of its useful life for £6,000. The van is to be depreciated over four years on the straight line basis. On 31 August 2020, Siobhan sells the van for £12,000. What is the profit or loss that she makes on this sale?

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The van cost £22,000 and Siobhan estimates that she will be able to sell the van at the end of its useful life for £6,000. The van is to be depreciated over four years on the straight line basis. So, the depreciation expense for each year is (£22,000 - £6,000) / 4 = £4,000. On 31 August 2020, Siobhan sells the van for £12,000. So, the profit or loss that she makes on this sale is £12,000 - (£22,000 - £4,000) = £2,000 profit.

Siobhan Buys a New Van on 1 September 2018 for Use