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CIMAPRA17-BA3-1 Exam - Topic 1 Question 110 Discussion

A non-current asset was purchased for 240000 at the beginning of Year 1, with an expected life of 7 years and a residual value of 50000. It was depreciated by 20% per annum using the reducing balance method.At the beginning of Year 4 it was sold for 100000. The result of this was:
B) A loss on disposal of 22880
A) A loss on disposal of 2720
C) A profit on disposal of 50000
D) A profit on disposal of 58571

CIMAPRA17-BA3-1 Exam - Topic 1 Question 110 Discussion

Actual exam question for CIMA's CIMAPRA17-BA3-1 exam
Question #: 110
Topic #: 1
[All CIMAPRA17-BA3-1 Questions]

A non-current asset was purchased for 240000 at the beginning of Year 1, with an expected life of 7 years and a residual value of 50000. It was depreciated by 20% per annum using the reducing balance method.

At the beginning of Year 4 it was sold for 100000. The result of this was:

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Suggested Answer: B

by Cassie at Apr 06, 2025, 04:15 PM

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Reita
9 months ago
Totally agree, B makes the most sense here!
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Lili
9 months ago
Wait, how can there be a profit if it was sold for less than purchase price?
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Wilford
9 months ago
I think it's option B, a loss of 22880.
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Stephen
9 months ago
Depreciation using reducing balance method is tricky!
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Estrella
10 months ago
The asset was bought for 240k and sold for 100k.
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Sherron
10 months ago
I’m leaning towards option D, but I’m not completely confident. I remember the residual value plays a role, but I need to clarify how it affects the final sale price.
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Freeman
10 months ago
I feel like the profit or loss on disposal depends on the carrying amount, but I can't recall the exact figures. Was it 20% of the book value each year?
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Annmarie
10 months ago
I think we did a similar question where we had to find the carrying amount before disposal. I need to double-check my calculations for Year 4.
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Evangelina
10 months ago
I remember we practiced calculating depreciation using the reducing balance method, but I'm not sure how to apply it here with the sale.
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King
11 months ago
Wait, what's the residual value again? I want to make sure I account for that properly in the depreciation.
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Paola
11 months ago
No problem, I've got this. Reducing balance depreciation is straightforward, and the rest is just plugging the numbers into the disposal calculation.
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Shonda
11 months ago
Hmm, I'm a bit unsure about the reducing balance method. I'll need to review the formula and make sure I apply it correctly.
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Lelia
11 months ago
Okay, this looks like a depreciation and disposal question. I'll need to calculate the net book value at the time of disposal and compare it to the sale price to determine the gain or loss.
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Thora
1 year ago
Ah, the old reducing balance method. I thought that was just for my bank account! But seriously, I'm gonna go with option D. Why? Because it's the most 'balanced' answer, of course!
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Joesph
1 year ago
User 3: I'm not sure, but I'll go with option D too.
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Hyman
1 year ago
User 2: Yeah, I agree. It seems like the most balanced choice.
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Daren
1 year ago
User 1: I think option D is the correct answer.
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Desmond
1 year ago
You know, I was thinking about becoming an accountant, but after this question, I'm not so sure. Anyway, I'll go with option C, a profit on disposal of 50000. Sounds like the safest bet to me.
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Ryan
1 year ago
Alright, time to put my calculator to work! I'm gonna go with option A, a loss on disposal of 2720. Gotta love those depreciation calculations, am I right?
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Lashandra
1 year ago
User 3: Yeah, depreciation can really impact the financial statements.
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Elmer
1 year ago
User 2: I agree, the calculations can be tricky sometimes.
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Steffanie
1 year ago
User 1: I think it's option A, a loss on disposal of 2720.
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Lenita
1 year ago
Yikes, this question is a real head-scratcher. But I'm feeling confident about option B, a loss on disposal of 22880. Got to show my accounting chops, you know?
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Cecilia
1 year ago
Hmm, let me think about this. Reducing balance method, huh? That's a tricky one. I'm gonna go with option D, a profit on disposal of 58571. Seems like the right answer to me.
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Alona
1 year ago
I agree with option D as well. The reducing balance method can be confusing, but that seems like the most logical choice.
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Kristofer
1 year ago
I'm not sure about that. I think it might be a loss on disposal instead.
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Ronald
1 year ago
I think option D is correct too. The profit on disposal of 58571 makes sense.
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Ethan
1 year ago
Why do you think that? Can you explain your rationale?
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Sheridan
1 year ago
I disagree, I believe the answer is D) A profit on disposal of 58571.
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Ethan
1 year ago
I think the answer is B) A loss on disposal of 22880.
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