In: Accounting
A company depreciates its equipment at the rate of 20 per cent per annum using the
straight line method, for each month of ownership.
20X4 Bought equipment costing $900 on 1 January
Bought equipment costing $600 on 1 October
20x5 No purchase or sale of equipment
20X6 Bought equipment costing $550 on 1 July
20X7 Sold equipment which cost $900 which was bought on 1 January 20X4 for
$275 on 30 September 20X7
The accounting year ended on 31 December each year.
Required:
(a) Draw up the equipment account and the provision for depreciation
──equipment account for years 20x4, 20x5, 20x6 and 20x7.
(b) What is the profit or loss on disposal of equipment sold on 30 September
20x7.