A car cost £9,000. It has an expected useful life of 6 years, and an expected residual value £1,000. It is to be depreciated at 30% per annum on the reducing balance basis. During year four the car was sold for £3,000. A full year's depreciation is charged in the year of purchase, with none in the year of sale. The profit or loss on disposal is

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Quizplus · Accepted Answer

Depreciation for year 1 = 30% of £9,000 = £2,700Depreciation for year 2 = 30% of £6,300 = £1,890Depreciation for year 3 = 30% of £4,410 = £1,323Depreciation for year 4 = 30% of £3,087 = £926Total depreciation = £2,700 + £1,890 + £1,323 + £926 = £6,839Profit on disposal = £3,000 - £6,839 = £256

A Car Cost £9,000