Accounting 9706 · AS & A Level · Accounting for non-current assets

Accounting for non-current assets — practice question

A business drew up its statement of profit or loss for the year ended 31 December. In that year, a non-current asset was sold on 30 April. The details for this item are as follows: Cost: $130\,000$ Sale proceeds: $53\,500$ Residual value: $10\,000$ Carrying value at 1 January: $52\,500$ Expected life: $8$ years Non-current assets are depreciated by the straight-line method, with depreciation charged for every month of ownership. No accounting entries had been made for this non-current asset for the year ended 31 December. What effect did this omission have on the profit for the year?

  • A$1\,000$ understated
  • B$5\,000$ overstated
  • C$6\,000$ understated
  • D$9\,000$ overstated

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