Question

Put the answer below in your own words

The assumption of no disposals during 1998 is not reasonable. The change in accumulated depreci-ation during the year is $385 ($3,895 – $3,510). Because this is significantly less than the estimated depreciation expense for the year ($494), it appears that there have been some disposals.

Answer 1

• Yes, the assumption of ‘no disposal’ during 1998 is not reasonable.
• This is because, instances when there are no disposals, the difference between two accounting period balances of Accumulated Depreciation would be equal to Depreciation expenses.

In the given case, Difference between accumulated Depreciation ($ 385) is NOT EQUAL to Depreciation expense for the year ($ 494)

• This indicates that there have been certain disposals.
• In Case of ‘no disposals’, Ending balance of Accumulated Depreciation ‘minus’ Beginning balance of Accumulated Depreciation = Depreciation expense for the year.
• It is very clear that in 1998 disposals have been made of certain assets that had been depreciated.
• Calculation of Accumulated Depreciation on Equipment (Assets) disposed off during 1998:

Beginning Accumulated Depreciation balance	$                           3,510.00
Add: Depreciation expense for the year	$                               494.00
Less: Ending balance of Accumulated Depreciation	$                           3,895.00
Accumulated Depreciation on Equipment disposed off	$                               109.00

• Hence, assumption of ‘no disposal’ during 1998 is wrong, because Equipment with Accumulated depreciation of $ 109 have been disposed off during the said year.