Question

In: Accounting

A company depreciates its equipment at the rate of 20 per cent per annum using the...

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.

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