A vehicle that cost KSh 450,000, with accumulated depreciation of KSh 270,000, was sold for KSh 150,000. What was the result of the disposal?
Answer and explanation
Correct answer: C. loss of KSh 30,000
- Step 1: Net book value = cost - accumulated depreciation = 450,000 - 270,000 = 180,000. Step 2. Proceeds - net book value = 150,000 - 180,000 = -30,000, which is a loss. Answer: loss of KSh 30,000. Why not the others: profit of KSh 30,000: That has the right amount but the wrong direction. loss of KSh 300,000: That compares the proceeds with the original cost instead of the net book value. loss of KSh 120,000: That compares the proceeds with the accumulated depreciation.
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