MCQ O-Level Principle of account for Nov 04

[dasani]

Machinery costing $25000 is depreciated at 20% per annum using the diminishing balance method. It is sold of start fo year 3 for $12000. What is the profit or loss on disposal?



Please help me how to answer this MCQ.

 

[hamza95]

1st year depreciation= 25000 x 20% =5000
2nd year depr. = (25000-5000) x 20%= 4000
Ttl depr. = 9000
net book value of machine= 25000 -9000 = "16000"
machine sold for "$12000", compare both values and the loss on disposal is of 4000.