Transferring accumulated depreciation on asset disposal

Steps:

• Calculate annual depreciation using straight-line method: 20% × $20,000 =$4,000 (residual value noted for book value but rate applied to cost).
• Determine months of ownership in the financial year (ending 31 December): April to December = 9 months.
• Compute accumulated depreciation: $4,000 × (9/12) =$3,000.
• On disposal, transfer accumulated depreciation by debiting the provision account $3,000 and crediting the disposal account.

Why D is correct:

• Standard accounting procedure requires debiting the provision for depreciation account with the full accumulated depreciation balance ($3,000) to clear it for the disposed asset.

Why the others are wrong:

• A and C: Credits increase the provision balance, but disposal requires a debit to remove it.
• B: Uses incorrect amount ($2,000); proper calculation yields$3,000 for 9 months' ownership.

Final answer: D