Question 1

Section A

A company disposes of a delivery van. The van originally cost $30,000 and had accumulated depreciation of $18,000 at the date of disposal. The van was traded in for a new model. The new van has a list price of $40,000, and the dealer gave a part-exchange allowance of $15,000 for the old van. What is the profit or loss on disposal of the old van?

Accepted Answer

1. Calculate the carrying amount of the old asset: Cost - Accumulated Depreciation. 2. Identify the disposal proceeds (in a part-exchange, the proceeds equal the trade-in allowance). 3. Compare Proceeds to Carrying Amount. If Proceeds > CA, it's a profit.

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Using the list price of the new van in the disposal calculation.

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA FA — Financial Accounting Practice Exam 6

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