Ola Limited sells a piece of property, plant and equipment for £21,000. The original cost of this asset was £102,000 and cash received from the sale was £21,000. The sale of this non-current asset generated a profit on disposal of £8,000. What was the accumulated depreciation that had been charged on this piece of property plant and equipment by the date of disposal?

Question

Quizplus · Accepted Answer

The accumulated depreciation is calculated by subtracting the profit on disposal and the cash received from the original cost of the asset. Therefore, £102,000 - £21,000 - £8,000 = £73,000. However, the correct calculation to find the accumulated depreciation should actually be: Original cost (£102,000) - Cash received (£21,000) + Profit on disposal (£8,000) = £89,000. This accounts for the reduction in the asset's book value due to depreciation up to the point of sale.

Ola Limited Sells a Piece of Property, Plant and Equipment