A Level Accounting (9706)•9706/12/O/N/24
Explanation
Pro-rated reducing balance depreciation to find net book value at disposal
Steps:
- Depreciate for full year 2022: 25% × 4,000; NBV = $12,000.
- Depreciate for full year 2023: 25% × 3,000; NBV = $9,000.
- Depreciate for half year 2024: 12.5% × 1,125; NBV = $7,875.
- Loss on disposal: 6,150 = $1,725.
Why B is correct:
- Reducing balance method pro-rates partial-year depreciation by applying half the annual rate (12.5%) to the opening balance, yielding NBV of 1,725 loss.
Why the others are wrong:
- A: $800 loss - Ignores partial-year depreciation, leaving higher NBV.
- C: $150 profit - Omits 2024 depreciation entirely, overstating NBV.
- D: $250 profit - Uses only two full years' depreciation, further overstating NBV.
Final answer: B
Topic: Accounting for non-current assets
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