Question 1

Section A

DeliveryCo traded in an old van for a new one. The old van originally cost $40,000 and had accumulated depreciation of $28,000. The new van has a list price of $50,000. The dealer gave a part-exchange allowance of $15,000 for the old van, and DeliveryCo paid the remaining $35,000 in cash.

What is the profit or loss on disposal of the old van?

Accepted Answer

Calculate the carrying amount of the old asset. Compare it to the proceeds. In a part-exchange, the part-exchange allowance acts as the proceeds for the old asset.

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Using the cash paid ($35,000) or the list price ($50,000) in the disposal calculation.

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA FA — Financial Accounting Practice Exam 5

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